A merger between the Alliance Group and Silver Fern Farms is about as likely as New Zealand First leader Winston Peters inviting political journalists to his birthday party.
Egos, history and personalities within the two meat co-operatives will ensure the two adversaries remain just that, despite the widespread acknowledgement that a merger is in the best interests of the industry.
There have been tantalising signs of their trying to work together, but the reality is the two co-operatives have retreated to their corners until at least after the September vote by Silver Fern Farms' (SFF) shareholders on whether to accept an offer from PGG Wrightson (PGGW) of $220 million for half the company.
A "yes" result, many in industry believe, could be crucial to getting the longed-for industry consolidation, by introducing someone from outside to knock heads together.
A "no" vote would see business as usual, and the possibility of competition driving the value of the two co-operatives to a point where they have to act.
This could see another procurement war, as companies compete for an expected 3.5 million fewer lambs in the South Island this year.
SFF sees introducing someone from outside the meat industry as crucial to getting new, fresh thinking and dispelling the industry's reputation as a dinosaur, introverted and opposed to fresh ideas.
The PGGW-SFF deal has been structured to allow Alliance to join, but the Invercargill-company has misgivings about the deal's viability and is blunt in its assessment.
Alliance chairman Owen Poole has previously said tribalism was not the reason it has rejected the SFF-PGGW proposal.
Rather, it did not see commercial merit in the SFF-PGGW business case.
Mr Poole has said it provided little of benefit for Alliance, which viewed SFF as financially vulnerable and still needing to rationalise plants.
Alliance considers the deal lacks market rationale, vision, adds cost by including PGGW in stock procurement, and he sees SFF as catching up by creating an integrated supply chain.
He rejected claims by PGGW chairman Craig Norgate and others that outside involvement could be a catalyst for change.
Mr Poole has said that involving a third party complicated and diluted farmer ownership, and was an obstacle to any chance of consolidating industry ownership.
SFF counters that the proposal would change the way the industry operates by linking more closely year-round supply of products required by new, more affluent markets, through contracted supply from farmers.
SFF chief executive Keith Cooper has said it would have more influence in that supply chain than Alliance, by assisting farmers with the use of animal genetics and management to meet those demands.
Alliance has run a progeny test programme to identify the lamb genetics it wants, but Mr Cooper has said there was no assistance or encouragement for farmers to use those genetics.
It is claimed cost savings from the PGGW merger would come from synergies and reduced corporate overheads, increased stock volumes because of a larger procurement team, leading to plant efficiencies, while returns would rise from more chilled production and price premiums for supplying specified product.
On-farm profitability would increase through production gains and premiums.
So far the Meat Industry Action Group has the only other proposal on the table, a plan for the two co-operatives merge and form an entity which would eventually grow to control 80% of the industry.
The group hopes shareholder pressure would force the two co-operatives into a marriage of convenience.
There are those who see PGGW as an opportunist, picking up a lame duck cheaply, possibly making a quick dollar and then abandoning it.
Mr Norgate is not acting out of altruistic motives, but then he cannot be called reckless, especially when he plans to borrow the bulk of the $220 million value PGGW has placed on a half-share of SFF.
There is no doubt that SFF's financial performance has been poor in recent years, but there are signs of a turn-around in the past 18 months.
If shareholders agree to the PGGW deal, some believe SFF could once again be the industry's strongest company, financially.
A Dunedin accountant who has looked at SFF's accounts for his clients and wished to remain anonymous, said there had been a transformation in the troubled company in the past two years.
He agreed with PGGW's $220 million valuation, saying it had strengthened its finances through supplier investment shares, repayment of debt, some asset sales and better trading conditions in the last year.
Debt has fallen from $501 million in 2005 to $330 million at August 31, 2007, and the company expected it to fall to $230 million at August 31 this year.
Shareholders' equity has also improved from 37% in 2007 to a projected 48% this year.
Most of PGGW's investment would be used to further reduce debt.
However, he questioned the dilution in value of the existing 78 million supplier shares, should PGGW be issued new shares.
He dismissed claims PGGW would be bailing out an ailing SFF, saying SFF had taken tough decisions and was a vastly different company from two years ago.
SFF's takeover of Richmond in 2002 appears to have come at some cost to its market share, although chief executive Keith Cooper has said that trend has been reversed in the last year.
While sheep numbers, in particular, have fallen, its market share measured by its European Union sheepmeat and United States beef and veal quota allocation has also declined.
Between 2002 and 2008 it has lost 24,000 tonnes of EU quota and 20% of its US beef quota which, sources have revealed, has affected its financial position through a decline in revenue of between $300 million and $400 million a year.
While that decline has affected profitability, the sell-down in stocks and debtors has had a positive effect on cash flow and debt.
Mr Cooper has said the erosion of market share had started with Richmond before PPCS bought it, and PPCS had turned around what was not a profitable business.
Allocation of quota often hit the large players first because they relied on achieving a peak kill, while smaller businesses were able to consistently secure smaller stock numbers.
Throughput was not a valuable measure of performance, he said, but the quality of business, providing value to farmer-suppliers and being market-led, was.
Valuing SFF has been a vexed issue and proved to be a major stumbling block when the two co-operatives considered proposals for a merger last year.
It is understood one reason for the talks collapsing was that the financially stronger Alliance placed minimal value on the indebted PPCS, as it was called then, and tried to dictate terms and conditions which were unacceptable to PPCS.
PGGW's $220 million valuation for half the company is, it is understood, double what it would have placed on that share just 12 months ago.
That significantly changes the scenario for Alliance group.
One farmer commented that the hunter had become the hunted.
More than that, Alliance is now in a difficult position.
It is known that Alliance has been approached about joining the SFF-PGGW party.
If it decides to tough it out, and SFF shareholders vote in favour of the PGGW deal, Alliance risks two things: having a stronger competitor chasing fewer lambs; and joining the new entity at a later stage but on poorer terms.
So why can the two companies not work together?Put simply, many in the industry claim there is a culture fuelled by a legacy of bad blood.
The analogy has been drawn of two yachts that have been match-racing - but without the same finesse - with each overcoming difficulties.
Initially, Alliance found itself in financial trouble when it bought Waitaki but was turned around by the skill and ability of former chief executive and current chairman Owen Poole, among others.
It was a golden era for PPCS, which cherry-picked assets, including the former Waitaki-owned Finegand plant near Balclutha and Silverstream from the failed Fortex at North Taieri.
But it also displayed some arrogance, which fuelled animosity from the struggling Alliance.
The roles were reversed when PPCS embarked on its long and bitter fight to buy Richmond.
It was a costly exercise, both politically and commercially, and it allowed Alliance to claim industry predominance.
It is doubtful the New Zealand meat industry has faced a more crucial period in its 126-yearhistory.
The key has to be to improve meat prices for farmers - and that is the challenge facing all companies, not just SFF and PGGW, as they sell their proposal.
Failure to improve farm returns will serve only to accelerate the change in agricultural land use.
Whatever decision SFF shareholders take, the industry's new structure will be irreversible.
Relying on a merger of the twoco-operatives to initiate that new structure may be wishful thinking.
