Hard line wanted on Silver Fern

Red meat farmers may face forced amalgamation if  Chinese investment in Silver Fern Farms is...
Red meat farmers may face forced amalgamation if Chinese investment in Silver Fern Farms is allowed. Photo by Stephen Jaquiery.

Red meat industry amalgamation could be forced upon New Zealand farmers if the Chinese gain a controlling stake in Silver Fern Farms, Labour MP Stuart Nash said in an interview yesterday.

Mr Nash called on the Overseas Investment Office to take a hard line over the possibly controlling stake in the Dunedin-based meat co-operative by a Chinese company.

''While this isn't a direct farm sale, Silver Fern Farms is a major player in our biggest industry. If control of the company goes offshore, it may impact on New Zealand's farming industry's ability to act in our wider export interests.''

An announcement on the future of Silver Fern may be made as soon as today.

Silver Fern has remained tight-lipped about possible Chinese involvement in a cash stake in the company, which industry sources told the Otago Daily Times was likely to be driven by its bankers.

Mr Nash said there was a history of overseas ownership in New Zealand's meat processing works but he was concerned a large Chinese investment in one company was not in the best interests of the long-term future for the industry.

Meat companies had traditionally undercut each other in overseas markets, reducing returns to farmers.

''We need a level of consolidation in the industry. I don't think we need a Fonterra Act through Parliament, but if the Silver Fern deal goes through there will be a level of consolidation. These guys have deep pockets and may adopt a take-it-or-leave-it position.''

Overseas investors could force consolidation on New Zealand farmers worried about their short-term returns through financial control of Silver Fern, Mr Nash said.

Earlier this year, the Meat Industry Excellence group warned New Zealand could lose control of 30% of the industry to foreign control unless it woke up quickly.

More than $400 million in net gains in the first five years were estimated if Silver Fern and Southland meat company Alliance Group merged.

Plant rationalisation across the big four - Alliance, Silver Fern, Anzco and Affco - would deliver huge cost savings, a report commissioned by MIE said.

Not only those operators, but the entire industry would benefit through greater throughput efficiencies following the close of some plants.

The New Zealand Herald reported Chinese Government-backed Bright Foods was understood to be the party which had been in negotiations with Silver Fern to take a stake in the company.

Bright Food is a wholly Government-owned enterprise but the negotiating vehicle is understood to be one of Bright Food's listed subsidiaries.

One of those subsidiaries - Bright Dairy and Food - took a majority stake in Canterbury milk processor Synlait Milk for $82million in 2010.

Mr Nash said a recent report from KPMG indicated 10% of all productive land in New Zealand had been sold to offshore investors.

Silver Fern was a company which added value to meat products, another point of concern for the OIO to consider.

''Once you start down this route, you can loose control of part of the primary sector industry which is still the backbone of the country.''

The OIO was likely to approve the investment, as it had never turned down an application for an overseas buyer to buy farmland since 2008, he said.

There was also no record of whether those buyers had delivered on their applications, something which was not good enough.

''The OIO needs to be tougher. The value being promised by the overseas investors must turn into reality,'' he said.

Silver Fern briefed Goldman Sachs to identify potential capital transactions to accelerate debt reduction and invest in value-added and plant improvement.

Its banking syndicate of HSBC, Westpac, Rabobank and the Commonwealth Bank of Australia is understood to support the introduction of a major capital partner.

The meat processor suspended trading of its shares on the Unlisted Exchange last month.

 


At a glance

• Silver Fern Farms seeking a $100 million cash injection.

• Bright Food, which has a stake in Synlait Milk, believed to be the interested party in taking a 50% stake in Silver Fern.

• An announcement is expected soon.

• Red meat industry amalgamation will be taken out of the hands of farmers.


 

 

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