Co-op status unaffected by potential merger

A merger between Silver Fern Farms and PGG-Wrightson would not compromise the meat processer's co-operative status.

It has been asked if corporate shareholding in Silver Fern Farms (SFF) would mean the new entity would no longer have co-operative status, but SFF chief executive Keith Cooper said PGG-Wrightson would be a transacting shareholder, supplying goods and services to the meat processor and marketer.

"The most important thing is to preserve all the characteristics of a co-operative, with a rebate structure, ownership and governance structure."

The New Zealand Co-operatives Association has confirmed that more than a 40% stake by an investor shareholder in a co-operative would mean the loss of co-operative status.

Preserving that status in the advent of a merger between the two centred on the type of PGG-Wrightson shareholding.

Mr Cooper said the constitution allowed shareholders who supplied stock to the company's rebate system either this year, or last year, to vote.

For the merger to proceed, 75% would have to vote in favour.

Retaining farmer control was also considered an issue.

Mr Cooper said the board's voting structure would require a board resolution to have the support of six of the eight directors and a shareholder's resolution to be passed by more than 50% of farmer shareholders.

PGG-Wrightson would not be able to pass a resolution in its own right.

Farmers have also asked what was in the deal for PGG-Wrightson.

Chairman Craig Norgate has said increased profitability and viability for its sheep and beef farmer clients would benefit PGG-Wrightson.

There would be an immediate $18 million financial saving from low interest costs, but a portion of any profits would be retained by SFF and reinvested in the business, with the balance of profits split evenly between PGG-Wrightson and rebate suppliers.