Sliver Fern Farms (SFF) has once again raised the possibility of working more closely with rival Alliance Group, after yesterday terminating its partnership agreement with PGG Wrightson.
The $220 million agreement, approved by SFF shareholders in September, was terminated yesterday after rural servicing company PGG Wrightson conceded it was unable to pay a $145 million installment towards a half share in the Dunedin meat company.
Credit sources had dried up due to the international financial meltdown, meaning they could not raise the funds.
While the two parties would continue to hold discussions, SFF chief executive Keith Cooper said the decision removed a potential impediment to discussions by the two meat co-operatives about possible industry aggregation.
Twice previously the two Southern meat companies have discussed the possibility of merging, but relations soured when SFF proposed a partnership with PGG Wrightson (PGG-W), a move Alliance saw as reducing farmer control and options.
Mr Cooper said in an interview that those perceived obstacles no longer remained.
"Once again we have removed an impediment, and we would like to think Alliance could see a way to enter an evaluation process, but that is their call."
Alliance Group chairman Owen Poole said SFF and PGG-W still had issues to work through which the Invercargill company would watch.
He would not comment on future plans or options.
Mr Cooper said the decision was taken to provide certainty to SFF staff and shareholders, but its dealings with PGG-W had been beneficial and he described the company as a "breath of fresh air."
"As a business, SFF has learnt a lot of things it can do differently. We have formed a very good relationship with PGG-W and also got a great level of confidence in their ability and desire to make a difference to the meat industry."
SFF could now look at other options not possible while it was discussing a partnership with PGG-W.
"It enables us to move on and see whether any alternative arrangements between SFF and PGG-W are feasible."
The two companies appear to have retained an amicable working relationship, with no discussion yet about the amount or form of any compensation SFF could seek from PGG-W.
"We expect that if any alternative arrangement is agreed and implemented, then this issue will be addressed as part of those arrangements."
SFF intended to pursue its plate-to-pasture integrated supply chain strategy which links specific customers to the type of product they want when they want it, but Mr Cooper said it would take longer to implement than if it had a capital injection from PGG-W.
He conceded that resources for its strategy, including its new Backbone procurement structure, and the technical field expertise to be provided by PGG-W, would have to looked at again.
