A merger between the country's two largest meat co-operatives appears back on the horizon, but the relationship between Alliance Group and Silver Fern Farms seems once again to be strained.
Alliance chairman Owen Poole said Silver Fern Farms (SFF) had approached it in recent months about a possible merger, but the overture was rejected because it would not lead to wider industry aggregation.
The country's other main meat companies, Affco and ANZCO, have ruled out merging, he said.
At the weekend, SFF directors published in newspapers an open letter to shareholders of both companies seeking their views on a joint investigation on the merits of a merger.
The letter was published without the knowledge of Alliance, a move Mr Poole said went behind his board's back, and did not have its support.
But SFF chairman Eoin Garden denied that, saying the advertisement and accompanying poll gave the shareholders of both companies a say in the future direction of their companies and filled a leadership vacuum.
"There has been so much debate that once and for all this is an opportunity for the actual owners of the companies to have their say without all the muddying that occurs at public meetings, interpretation and media discussion."
Whether this would lead to merger discussions and negotiations depended on the results of the poll, accompanying the advertisement, which would be independently collated, he said.
In the advertisement, SFF asks shareholders if they want an independent facilitator appointed to chair a joint evaluation committee.
That committee would draw up a strategic plan on the future of meat and meat by-products with an agreed governance structure, and oversee an independent financial analysis of an amalgamation of the two companies with the report available to shareholders.
However Mr Poole saw it differently, saying his board had considered a merger three times, including having an independent assessment.
It was rejected each time, and this was no different.
He said Alliance shareholders two years ago overwhelmingly rejected a merger proposal promoted by farmer lobby group the Meat Industry Action Group.
"Recently we had discussions with SFF and their merger proposal falls well short of commercial and financial hurdles."
Wider industry aggregation was needed.
Merging the co-operatives would not achieve that but instead leave them responsible for industry rationalisation.
"A merger of the co-operatives would not be of sufficient size to change the behaviour onshore or in-market in order to create advantage and enduring value," Mr Poole said.
Mr Garden said the industry environment was quite different than during previous attempts to bring the two companies together in 2007-08.
"We have tried to re-engage Alliance, but they keep defaulting to the analysis of three to four years ago as opposed to re-evaluating the situation in the current supply, economic and global environment."
Back then, SFF was seen as a weaker rather than an equal partner, with equity in 2007 of 35.2% and debt of $334 million.
As at September 30, equity was 70%, debt was at $118 million and it had repaid its five-year bonds ahead of schedule.
In addition, the lamb kill has fallen five million in five years.
Mr Garden said if there was overwhelming support from the estimated 12,000 shareholders to evaluating a merger, the benefits of which he has estimated at $100 million a year, then it was incumbent on the boards to listen.
"If we get an apathetic response or less than affirmative response, then the debate should cease and the companies get on with their own strategic plans."
The proposal has the support of former Alliance director Kerry Dunlop, who has written to the Otago Daily Times urging shareholder support.
