Under the proposed transaction, Dawn Meats Group would invest $250million to acquire 65% of the shares in Alliance Group, subject to shareholder and Overseas Investment Office approval.
"To allow Dawn Meats to invest into Alliance, whilst also maintaining our co-operative structure, we propose to establish a new co-operative holding vehicle, to be known as New Alliance Co-operative," chairman Mark Wynne said.
"This will enable us to retain a standalone co-operative and farmer-focused vehicle, to ensure a collective voice is heard on Alliance’s strategy."
The effect of exchanging Alliance shares for shares in the new post-Dawn Meats investment co-op would be that New Alliance Co-operative would be a 100% farmer-owned co-operative, he said.
"Each farmer shareholder will hold the same percentage interest in New Alliance Co-operative as they currently hold in Alliance.
"New Alliance Co-operative will, before the Dawn Meats investment, hold 100% of the shares in the current Alliance operating company.
"New Alliance Co-operative will, after the Dawn Meats investment, hold 35% of the shares in the current Alliance operating company, with Dawn Meats holding a majority 65% interest."
To ensure New Alliance Co-operative remained a co-operative company, Alliance would acquire the livestock from shareholders on behalf of New Alliance Co-operative.
The proceeds from Dawn Meats’ investment would be used to reduce Alliance’s short-term working capital facility by about $200m, accelerate the board’s strategic capital expenditure programme and enable the distribution of up to $40m to the co-operative, subject to livestock supply.
Under the proposed distribution, up to $20m would be released from the joint venture company to the co-operative at the end of the 2026 financial year, subject to livestock targets being met. The co-operative would then distribute up to $20m to shareholders with up to $9m (or 45%) paid as a dividend and up to $11m (or 55%) paid as a rebate.
Up to $20m would be released as the second tranche from the joint venture company to the co-operative at the end of the 2027 financial year, subject to livestock targets being met. The co-operative would then distribute up to $15m (or 75%) as a rebate to shareholders and retain up to $5m in the co-operative for capital reinvestment.
The rebate was calculated on the average stock supplied over the prior two years plus the current year, and capped at the level of shares held.
The Alliance board saw benefits from the proposal, including the potential for optimising its beef-boning processes.
There could also be benefits from Dawn Meats’ established relationships with many of the United Kingdom’s and Europe’s largest retailers and foodservice chains, "reducing reliance on intermediaries and enabling higher margins".
The proposed transaction would be implemented via a scheme of arrangement and would require both 75% of shares voted to vote yes and more than 50% of the total number of shares in Alliance to vote yes.
"If shareholders do not vote to support the proposal, as concluded within the Northington Partners report, and due to the unsustainable level of debt Alliance is carrying, the Alliance board would be obligated to enter a process led by its banking syndicate and face the risk of potential insolvency," an Alliance media statement said.
