7 Sep 2008

Farmers vote against meat company merger talks

9:28 pm on 7 September 2008

Farmer shareholders of the Alliance Group meat company have voted against a proposal to back fresh merger talks in the meat processing industry.

Shareholders in the Invercargill-based co-op were being asked to support a resolution that would have forced their directors to restart merger negotiations with Dunedin-based rival, Silver Fern Farms, formerly PPCS.

A farmer group which is pushing the merger, the Meat Industry Action Group, wanted the two co-ops to join forces to create a new national entity controlling 80% of production.

It says the industry needs a national champion in overseas markets, similar to the dairy giant Fonterra, to avoid continuing poor returns.

Directors of the Alliance Group had urged farmers to vote against the resolutions, because they believe they can lift returns to farmers with initiatives already under way.

Silver Fern Farms will consider the Meat Industry Action Group's merger resolutions at a special meeting in October.

Reaction to the vote

Meat Industry Action Group chairman John Gregan says he is disappointed the proposals have been rejected.

However, he says further restructuring of the meat industry is inevitable, as a 23% drop in sheep to process is predicted this season.

Federated Farmers says the vote shows farmers have faith in the Alliance board, which urged them to reject the proposal for merger talks.

But it says the failed vote won't necessarily end the push for a merger as farmers recognise considerable change is needed in the meat industry.

Alliance says it did not see a merger with Silver Fern as the starting point for meat industry consolidation.

Its chairman Owen Poole says the discussions on the industry's future need to go beyond the two co-operatives.

He says Alliance needs to reflect on how to exploit market opportunities for the benefit of New Zealand and its farmers.

But Mr Poole says there is a significant drop in livestock numbers which is a drag on returns and overcapacity and consolidation still need to be addressed.

He says that will be the subject of coming Alliance discussions.

Silver Fern's chief executive, Keith Cooper, thinks Friday's Alliance farmer vote should not be read as opposition to the idea of merger talks further down the track.

He says there was a problem with the negotiation process that MIAG was proposing in its resolutions, because it conflicted with the statutory responsibilities of the companies' boards.