Alliance Group: “business case for a merger must stack up”

Meat processor and exporter Alliance Group confirmed today that the co-operative had submitted a bid for Silver Fern Farms (SFF) prior to the company’s capital-raising process getting underway as part of ongoing discussions with SFF.

Murray Taggart  1

However, Alliance Group chair Murray Taggart (right) said the co-operative was unable to comment on whether Alliance Group had been involved in SFF’s capital raising programme for legal reasons.

“Alliance Group’s board and senior management have worked hard to engage with SFF and discuss opportunities for industry consolidation with them.

“We have evaluated the potential for a merger with, or the acquisition of all or part of, SFF on many occasions over the last 10 years. Our view has always been consistent. The business case for any merger or acquisition needs to stack up, the benefits must be accurate and the risks clear.

“We’ve let our shareholders know that we’ve been examining opportunities for industry consolidation that have merit, but we’ve been limited in what we have been able to say.

“Our focus has always been to ensure that any transaction makes commercial sense for our shareholders and does not expose them to any undue financial risk or require our farmers to put their hands in their pockets.”

Taggart says Alliance Group would continue to examine and pursue any worthwhile proposals or opportunities for industry consolidation that are in the best interests of its shareholders.

“We remain firmly committed to maintaining Alliance Group’s purpose as a co-operative business owned by farmers for farmers.”

SFF’s decision to sell half of its business to Chinese investors meant that Alliance Group is now the only 100 percent New Zealand farmer-owned major red meat processor.

“We believe it is important for New Zealand farmers to retain ownership of their industry and the best way to achieve this would be to supply Alliance Group as the only remaining major co-op.”

David Surveyor, chief executive Alliance Group.

Alliance Group chief executive David Surveyor said the co-operative has a clear strategy for building a better business to ensure its shareholders achieved better returns. The co-operative would be sharing this strategy with farmers at roadshow meetings next month.

“Our strategy is to drive efficiency improvements and sales and marketing gains to deliver increased prices to farmers and pull through increased livestock volumes that will then allow us to further lower costs and reinvest in the business.

“We have six strategic pillars that underpin this strategy – market development, co-operative principles, securing farmer supply, lowering costs, improving safety and building capability.

“We have already begun a process to transform the business with a range of initiatives that will deliver more significant gains to our business without the risks of merger or acquisition.”

Surveyor says that these initiatives included the recent announcement to invest $15 million to install new robotic primal/middle cutting machinery at its Smithfield and Pukeuri plants and a range of projects, which had seen the company increase the shelf life of its products.

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