19 Oct 2015

Silver Fern Farms not a co-op now: Alliance

3:34 pm on 19 October 2015

A big player in the local meat industry has its doubts that Silver Fern Farms remains a co-operative, following the Chinese joint venture deal.

The shareholders of the Silver Ferns - the country's largest meat company - have overwhelmingly backed a $260 million joint venture deal with China's biggest meat processor, Shanghai Maling.

Silver Fern Farms logo

Photo: Silver Fern Farms

The chief executive of Alliance Group, David Surveyor, doubted Silver Fern Farms was still a co-operative.

"They may be somewhat by a technical definition, but we think their business model has now moved. But really I think it's much more a question for Silver Fern Farms to decide."

"One of the things that we are absolutely stressing is that we are a co-operative, we are co-operatively-minded farmers and we are rolling out a set of co-operative principles that really see farmer shareholders at the heart of every decision we make."

Mr Surveyor said Alliance Group will be the only major red meat co-operative left in New Zealand and its focus was on ensuring it made the right decisions for farmer-shareholders.

And he said Alliance's strategy to increase returns for farmer-shareholders was not reliant on the ownership structure of Silver Fern Farm.

Mr Surveyor said the company was open to opportunities for further collaboration in the meat industry.

"We would be interested to talk to other players if industry consolidation made sense, but I think the sort of framework that we would do would be around wanting to have a co-operatively-based model because we think it's fundamentally good that New Zealand farmers keep an influence over the full value chain for the red meat sector," Mr Surveyor said.

But Silver Fern Farms chairman Rob Hewett insisted the strong balance sheet that will result from its new joint venture company will create opportunities for further collaboration in the meat industry.

Mr Hewett said Silver Fern Farms has talked in the past about meat industry rationalisation but hasn't acted, however the new joint venture company means it now could.

"The consolidation required in the South Island is still there," Mr Hewett said.

"Our balance sheet strength will allow opportunities for collaboration to take place. An obvious one is synergies around livestock transportation. If you wanted to chuck the net very wide, ultimately it could be about toll processing, it could be about collaboration in market - certainly in terms of logistics in market."

"There's a whole lot of opportunities, I guess the first thing is, we'll get this transaction completed, when we've got certainty around our strategy - and that'll be our first priority - but ultimately, I think our balance sheet strength will provide the potentiality for change that's good for Silver Fern Farms and ultimately the industry."

The Overseas Investment Office and Shanghai Maling's shareholders must still approve the joint venture with Silver Fern Farms.

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