And prospects of the deal progressing as planned do not look promising, given the worsening global crisis, which sources say could add $7.5 million to $10 million a year in debt-servicing costs to PGG Wrightson (PGG-W), provided it is able to get the money from increasingly risk-averse lenders.
PGG-W holds its annual meeting in Christchurch tomorrow and is expected to update shareholders on the $220-million deal.
Its chairman, Craig Norgate, declined to comment when asked for an update yesterday, but earlier, both parties said they had the month of October to settle.
This deadline now looks like being extended.
In addition to uncertainty caused by the credit crunch was concern over the value of Silver Fern Farms (SFF) which, like many companies, would be less than it was when the deal was negotiated and approved by SFF shareholders in September.
Financial sources said the extra cost of servicing debt incurred to invest in SFF meant the value of a half share in the company would be less than the $220 million PGG-W agreed to pay.
PGG-W was to have paid $110 million through an international share placement earlier this month as a first installment towards a 50% stake in SFF, but the credit crunch has seen markets dry up.
Unless Mr Norgate can secure funding soon, there was speculation the two companies would implement what aspects of the deal they could, leaving the finer details until global financial markets settled down.
It was known the two parties had a congenial relationship and a desire to make the partnership work, and it appeared they were implementing parts of the partnership which required minimal or no cost.
SFF was continuing with its plate-to-pasture integrated supply-chain strategy, but the company has previously said its implementation, which includes developing new markets, promoting its SFF brand, retiring debt and introducing new processing technology, would be twice as quick with the cash injection from PGG-W.
The two companies have started amalgamating livestock procurement roles, and earlier this month, SFF released a new procurement system, Backbone, which it says is central to its plate-to-pasture strategy.
It offers farmers new pricing and supply contracts based on market demand for specific cuts and its varying nature over time.
SFF has secured its funding requirements for the season and is expected to announce tomorrow a net profit of about $40 million and a much stronger balance sheet.
SFF chief executive Keith Cooper was reluctant to speculate on what might happen with the PGG-W deal, saying both parties were still working to implement the original agreement.
He agreed that the uncertainty could not go on forever, but said while finalising the deal could go into next month, neither party had yet looked at setting a deadline.
