PGG's $10m offer spurned

Silver Fern Farms has described as inadequate an offer of $10 million compensation from PGG Wrightson for its failure to complete a partnership last year, a clear signal of a deteriorating relationship between the Dunedin meat exporter and the national rural farm services company.

PGG Wrightson (PGGW) yesterday issued a statement offering mediation and $10 million in compensation to Silver Fern Farms.

Silver Fern chief executive Keith Cooper was caught unaware by PGGW's press release, a tactic he said was antagonistic.

"It is particularly antagonistic to start playing negotiations via the media with something that appears to be heading towards the courts."

He also dismissed suggestions by PGGW that $10 million would settle the issue. "It's grossly inadequate and entirely unacceptable."

In the statement to the New Zealand Stock Exchange, the PGGW board offered Silver Fern Farms mediation and said PGGW wanted a settlement based on "delivery of the procurement and supply chain benefits that would have been achieved by the original partnership for the benefit of farmers".

PGG chairman Craig Norgate said the $10 million represented $3.5 million in costs and an ex-gratia payment.

This was "in addition to the substantial benefits to be provided by an ongoing procurement agreement".

Mr Norgate said yesterday PGGW had suggested other structures to address issues in the meat industry while providing redress for not completing the transaction.

He said Silver Fern shareholders would receive all the economic benefits rather than 50% under the partnership.

Mr Cooper said it was a vastly different scenario to what Silver Fern shareholders approved last year and the original procurement agreement was contingent on PGGW completing the transaction and taking a shareholding, which did not occur.

"They are attempting to substitute elements of the agreement which [Silver Fern ] shareholders have clearly not approved."

In the original agreement, PGGW was to take a 50% stake in Silver Fern Farms and be responsible for all livestock procurement.

Mr Cooper said the latest proposal meant PGGW would "clip the ticket" for its procurement services.

A $220 million partnership between the two companies was agreed to last year, but the global credit crunch stymied efforts by PGGW to borrow the funds, forcing the proposal to be abandoned.

Until yesterday, both companies had been talking amicably about co-operation and compensation.

Mr Cooper said Silver Fern was reviewing its position, including whether it would agree to PGGW's offer of mediation.

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