A new super meat company could be operating by the start of next year - and initial overwhelming support for the concept indicates it has farmer backing.
After four meetings and with nearly 1000 votes cast, there has been no dissent by Alliance Group shareholders to a plan by the co-operative to initiate talks to create a super meat company. The company has about 6000 shareholders.
The road show to judge support attracted 100 Alliance farmer shareholders at Milton and 50 at Oamaru yesterday. Nearly 700 attended two Southland meetings yesterday.
Alliance Group chairman Owen Poole told the Milton meeting that a merger between Alliance and PPCS would be the vehicle to create a company with assets of $1.7 billion, responsible for procuring, processing and marketing 80% of New Zealand's meat exports.
More importantly, it would aim to resurrect the industry's sagging fortunes. ‘‘Things have got to change. This is not a good place.''
Three years of low sheep meat returns have prompted many farmers to consider other uses for their land, with 1.4 million fewer sheep and beef cattle expected to be farmed in the next three years and 357 farms likely to convert to dairying.
Mr Poole said four companies were ‘‘attracted'' to the super company concept and a fifth was ‘‘open-minded''. He declined to name which companies had been approached.
Depending on the level of farmer ownership, and whether meat companies opt to cash-up or become shareholders, farmers could have to invest up to $40,000 of fresh equity in the venture, in addition to their existing shareholding.
Mr Poole said it would be a sound investment. ‘‘We hold the view that the payback time on that capital will be six to 12 months, which makes it a reasonably attractive proposition.''
Three issues were not negotiable: the new entity must have 80% market share, it must be farmer controlled with a minimum shareholding of 60%, and all parties must support the same strategic plan.
Alliance chief executive Grant Cuff said savings from market cohesion and market clout were estimated to be worth $10 a lamb to farmers.
Savings from lower corporate and plant overheads, cartage and infrastructure savings and rationalisation of offshore offices would contribute another $5 a lamb.
Alliance estimates $400 million in financial benefits could start flowing from the start of 2009.
Mr Cuff said quantified benefits would flow from greater investment in research and technology, marketing, brand development, consumer awareness, category management and developing new markets.
Companies invested in these programmes independently, but one entity could invest more and achieve quicker gains, he said.
The new entity would be responsible for closing surplus plants, possibly as soon as 2009, in a move he described as inevitable.
The key to a 2009 start was the speed of Government legislation. Mr Poole said overwhelming farmer support would help drive that process.
Most New Zealanders would not be disadvantaged by the creation of the super company, because it was focused on exporting.
Assistance would be sought from the Meat Board, which administers the 226,000-tonne European Union lamb quota, including seeking a moratorium on allocating new quota, which Mr Poole said would provide ‘‘some breathing space'' for the super company.
Shareholder meetings will be completed next week. If directors had a mandate, discussions would begin with other meat companies and the wider industry, Mr Poole said.
The next steps were an independent valuation of the identified companies, commissioning a study on the economic benefits from a super meat company, seeking legislative changes and then final approval from shareholders.