Suppliers and shareholders of Dunedin meat company Silver Fern Farms have a big decision ahead of them this week when they vote on whether to allow a proposed joint venture with a Chinese company to proceed.
The Silver Fern Farms board remains unanimous in its endorsement of the partnership with Shanghai Maling, a company which has ties to the Chinese Government.
There is understandable concern about the joint venture and ultimate control of the new Silver Fern Farms company, as opposed to the co operative which will continue to operate in much the same way it does already.
As with the Trans Pacific Partnership agreement hammered out in secret by 12 trade ministers and their advisers, Silver Fern Farms negotiated the deal with Shanghai Maling in secret and shareholders were left fretting about just what they were being signed up to by their board.
It was not the best way to move forward but Silver Fern Farms has not been renowned for its openness in the past and old habits die hard.
Chairman Rob Hewett fronted a press conference on his return, lauding the details of the deal, which on paper are significantly in favour of the existing farmer owned co operative.
The injection of money from Shanghai Maling will allow Silver Fern Farms to become debt free and concentrate on growing its premium brands of meat. China is a fast growing market for the premium beef and lamb market and having a significant Chinese partner will make access easier.
What is less clear is what Shanghai Maling receives for its money and just what the implications of the fine print are. Whether the company will be sufficiently happy with access to premium protein and a New Zealand brand is up for debate. And that debate has not yet happened.
Complicating the issue is a mystery underwriting offer led by opponents of the deal. Details are sketchy and, again, secrecy is the key word for the issue. Suppliers and shareholders have previously had the opportunity to invest cash into Silver Fern Farms but of the $100 million sought by the board, only $22 million was forthcoming.
Given farmer confidence has taken a hit in recent times, it is unlikely the $100 million can be found from farmers. There is no indication of where the money will come from and who is behind the deal. Something for shareholders to carefully consider before voting down the proposal by the end of this week.
The meat industry is littered with failures and mergers. Silver Fern Farms and its Invercargill rival Alliance Group have refused to engage in meaningful discussions about a possible merger. Both companies have debt on their books and the same long term problem of reducing that debt.
Both, however, have made great strides in reducing their debt in the last financial year. This puts Silver Fern's claims its bankers are pressuring it to form the joint venture to the test.
Silver Fern Farms has been holding shareholder meetings around the country to persuade its members to support the deal. In general, it seems most of the farmers can see that a reduction in debt, a return to dividends and the prospects of better prices for their premium meat is good for them.
They may have questions to ask about the overall control of any new company, and it is hoped they took the time to ask those of the directors - some of whom were elected to keep the co operative in New Zealand hands and are now leading the campaign for the joint venture.
In this crucial week ahead, it is hoped both sides of the argument make public all details, including the true benefits for Shanghai Maling in the joint venture and the identity of the mystery underwriters. The future of a long established Otago brand is at stake.
