19 Oct 2015

Silver Fern Farms sale 'best decision'

1:55 pm on 19 October 2015

The decision by Silver Fern Farms' shareholders to forge ahead with a Chinese joint venture has removed uncertainty from the sector, according to a meat industry commentator.

Chair of Silver Fern farms Rob Hewett at the shareholder meeting.

Chair of Silver Fern farms Rob Hewett at the shareholder meeting. Photo: RNZ / Ian Telfer

Shareholders of the country's largest meat company have voted 82 percent in favour of the deal with China's biggest meat processor, Shanghai Maling.

The Chinese state-owned enterprise is putting in $260 million in return for joint control of a larger and stronger company.

Silver Fern Farms chairman Rob Hewett said the decision was a defining moment which would be looked back on as the day the meat industry really got going again.

Industry commentator Allan Barber said the move was the best thing for the co-operative.

"I don't think it's ever good to have the largest player in an industry with a serious debt burden and constant rumours and speculation about whether they are going to go through or not and that's now been removed."

There had been suggestions that the joint venture could cause unreasonable competition between Silver Fern Farms and other local meat companies, but Mr Barber did not agree.

"There's been a view that Silver Fern will now be in the position to go out and compete visciously with other companies, pinching all the livestock but that's not what they're about, they're actually about trying to get to an efficient processing configuration and to process the animals that meet the specifications for the customers."

He said the organisation can now focus on value added products and market development as other meat companies have been doing.

"So it's not exactly earth-shatteringly new stuff, it's just that the biggest company that had no cash to do anything with has now suddenly got the capability to do it because it's got a shareholder that's going to enable it to put money into doing the stuff that it was really keen to do but couldn't afford to."

Mr Barber said the possibility that Shanghai Maling may decide to go for a bigger percentage of the company could not be ignored, but he said it would be paying for it, and it would be up to the shareholders to vote for it.

The Meat Workers Union said that while it was pleased it has brought certainty to workers, it was concerned that half of the country's largest meat company was going into foreign hands.

The union's national secretary Graham Cooke said one of the main concerns for its members was job security, and one scenario was that the overseas banks may have called in their money which would not have been good for the future of Silver Fern Farms.

He said there had been a growing trend for sending sheep carcasses to China, which was a possibility the meat processing workers did not like because they did not want the workers - who added value to the products before they get shipped overseas - to lose their jobs.

Silver Fern Farms was very clear that its added value retail cuts programme would continue and that Shanghai Mayling had reassured the company of this, he said.

"We were reasonably satisfied that that was the ongoing direction."

Meat group disappointed over foreign merger

The farmers advocacy group Meat Industry Excellence (MIE) said it was disappointed Silver Fern Farms was merging with a foreign company rather than with another local co-operative.

MIE chairman Peter McDonald said for years his group had dreamed of Silver Fern Farms merging with the Alliance, a possibility the two co-operatives never even discussed.

"While the leadership groups of both co-operatives often talked about their differences, the simple fact remained that the two owners of those co-operatives, that is the farmer shareholders, basically had an aligned future," Mr McDonald said.

"We thought that was the best way forward rather than the incursion of foreign ownership and foreign control. We farm in a biological system that has environmental and climatic limitations and therefore we need to control where we send our stock and at what time. So we think it's very important, it always has been very important, for farmers to have a semblance of control."

Mr McDonald said he encouraged the two co-operatives to discuss a merger earlier this year, and he's sad Silver Fern Farms shareholders weren't given the opportunity to consider it.

"The vote on Friday by the Silver Fern shareholders really was a vote on behalf of the entire industry, because it has really changed the direction of the entire red meat industry. It was a momentous vote that was the biggest day in two generations of farming, so MIE was well aware that farmers wanted change. They believed the status quo wasn't acceptable and we knew as a group that the first opportunity farmers had to vote for change, they would take it up.

"And they've shown that last Friday."

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