Alliance shareholder vote
Alliance Group shareholders need answers to their questions to make an informed decision whether to accept or reject a proposal to allow an Irish company to buy a majority share of the red meat co-operative, southern farmers say.
All the required information will be available before the vote including year-end accounts, which are expected to report a profit, board chairman Mark Wynne says.
At a special meeting next month, Alliance shareholders will vote yes or no on a proposal for Irish company Dawn Meats Group to buy a 65% stake in the co-operative for $250 million.
For the deal to be accepted, at least 75% of shareholder votes must be in favour and all the votes of approval must represent a minimum of 50% of the total shareholding.
The deal then needs approval from the Overseas Investment Office.
Mr Wynne warned, if the deal was rejected, the board would be obligated to enter a process which might involve asset sales, plant closures and cost-reduction initiatives.
Sheep, beef and dairy farmer, Alliance shareholder and former board director Russell Drummond, of Avondale near Mossburn, said he needed more information before he decided how to vote but "it doesn't feel like a great deal to me".
"There are a lot of questions unanswered out there at the moment."
Shareholders might come out better off from a deal where all of Alliance was sold.
"This could be our last chance to get any value back out of the company."
If the deal was a way to pay off debt and did not fix Alliance’s profitability issues and shareholders got very little value from the deal.
"Is this just a Band-Aid?"
Processing overcapacity would remain an issue if shareholders accepted or rejected the proposal, he said.
A deal must go beyond paying back the debt and make Alliance more profitable and more competitive in the market by getting more livestock through its plants.
Overcapacity was an industry-wide issue, he said.
When he was on the board, egos could get in the way of industry rationalisation being a serious prospect.
A frustration was Alliance’s audited annual results normally being released in November, which would be after the vote next month.
He would like the vote to be on November 20 so shareholders had more time and information to make a decision.
Other information required includes who gets the $40 million from the sale, earmarked in the deal for the co-operative.
He believed it would be given as procurement bonuses to farmers supplying livestock for slaughter.
The money would be better spent paying out shareholders who were due to be paid out some, or all, of their shares.
"I don't believe that the past equity from shareholders should be funding supply for the new entity."
Other information needed was the benefits Dawn Meats got from the deal, such as a dividend or access to a product they could sell to their own suppliers.
He also wanted more detail in the proposal about how shares would hold value.
"I don't know who's going to buy them."
Mr Wynne said Alliance’s year-end accounts would be released as soon as the audits were finalised.
"This is likely to be just before the vote."
The board expected to report a profit for the 2024-25 financial year, Mr Wynne said.
"This reflects the significant progress we have made in improving Alliance’s operational performance and efficiency. Our refreshed strategy, focused on a back-to-basics approach, is delivering results."
The board believes the October timeline provides enough time for farmers to examine the details of the proposed partnership so they could make an informed decision while meeting the expectations of its banking partners.
Mr Wynne understood it was a busy time for farmers.
Shareholders could learn more about the proposal at roadshows, shareholder webinars, a comprehensive scheme booklet, an independent advisor’s report and regular updates.
Shareholders were encouraged to contact an Alliance farmer-director if they had any questions, he said.
A vote would be held next month, pending necessary regulatory and court process, because its banking partners had been clear that debt repayment was the priority.
"Our obligation to the bank sets the timetable."
"That requires certainty from shareholders about the way forward."
As part of the proposed investment, up to $40 million will be distributed to the co-operative, subject to livestock supply targets being achieved over a two- to three-year period.
The co-operative would then determine how best to utilise the funds to strengthen the business for the benefit of all shareholders.
"This investment is about building long-term value for our farmers."
The specifics of the proposal would be shared at the roadshow meetings.
Sheep and beef farmer and Alliance shareholder Ben Dooley, of Mimihau in Central Southland, said with the current information available to him, he would be voting yes.
"I think it’s a deal that we have to take."
The deal was not "particularly great" but he was pleased the board had been able to secure it, considering the "mind-blowing" decline of its business in recent years.
"I’m surprised they got as good of a deal as they got, considering the situation we’re in."
If shareholders voted no, he believed plants would be closed and farmers would lose space to slaughter their livestock.
Overcapacity of killing space at meatworks was an issue but southern farmers need it to ensure lambs could be processed at peak times, or "seasonal swings" which could be dictated by grass growth or drought.
"We need that flexibility."
The access to killing space at different times was "worth a lot" to his family’s business.
"I don’t want to be at the mercy of the meatworks as to when we would be able to kill our lambs."
He feared if farmers voted no the Lorneville plant would be one of the first to be decommissioned.
He did not believe keeping Alliance an 100% co-operative was an option because some shareholders would leave if asked for money again.
If the deal was accepted, a conversation was needed on how restructure processing and sales of red meat across the industry to increase profitability for everyone involved.
"It’s just not working."
Rural Livestock agent, farmer and shareholder Barry Matthews, of Ngapara in North Otago, said he would be voting yes.
Selling a share of the business would help Alliance "survive" and allow it to keep its plants open, which would keep people in jobs.
Sheep and beef farmer and Alliance shareholder Andrew Morrison, of Waikaka Valley, whose brother Don Morrison is a board director, declined to reveal how he would vote.
He wants shareholders to vote with their heads rather than their hearts.
When more information on the deal became available, he urged shareholders to engage with the process and "fully understand the numbers" to better access which way to vote and then stand by their decision.
All shareholders need to vote, he said.
He believed the board had done well to present shareholders a "tangible offer".
"This whole journey started because shareholders couldn’t see a way to capitalise this themselves."
Consequently, the problem lies with the shareholders rather than the board.
He believed the board had done a great job "turning the business around" including decommissioning Smithfield plant, upgrading its IT systems and improving health and safety.
Dawn Meats Group
• Founded in County Waterford in Ireland in 1980 by three farming families.
• Annual revenue of nearly $NZ 6 billion
• Employs more than 8000 staff in 10 countries.
• Operates as Dawn Meats in Ireland and as Dunbia, through a subsidiary company in the United Kingdom.
• Processes about 1 million cattle and 3.5 million sheep annually across its 11 Irish and 13 UK sites including four retail packing facilities and two frozen burger facilities.
• Exports to more than 50 countries.
