Waterford-based Dawn Meats’ NZ$250 million (€124 million) bid for control of one of the country’s largest meat exporters is facing a last-minute challenge from a group of prominent shareholders.
The Alliance Group’s 4,300 farmer shareholders are due to vote on Dawn’s offer for 65 per cent of the debt-laden co-operative next month.
An independent appraisal from New Zealand investment bank Northington Partners just last week backed the Alliance board’s assessment that Dawn’s offer was the most credible available and a failure to accept it could result in forced asset sales and possible insolvency.
However, a letter from a group of prominent Alliance shareholders due to be released later this week calls for the offer to be rejected in favour of a recapitalisation of the co-operative by its farmer owners.
RM Block
It is not the first time Alliance’s farmer shareholders have been called on to bail it out. Last year, the co-operative tapped shareholders for NZ$200 million of deductions from livestock payments to repay debt, but abandoned the plans after a shareholder revolt.
The letter says a turnaround in the co-operative’s profitability and a dramatic rebound in livestock returns since then means shareholders should reject Dawn’s offer and again consider putting up the capital themselves.
Signed by several large-scale South Island farmer shareholders, as well as a former chair of the country’s major farmer body, Beef + Lamb New Zealand, the letter outlines a plan to repay debt of NZ$188 million over three years with a mix of new farmer capital and profits from the co-operative.
“We understand farmers are worried that the banks will take control of Alliance Group if the Dawn Meats offer is not accepted,” the letter stated.
“They have not had a credible alternative offer to consider until now.”
However Alliance chairman Mark Wynne told The Irish Times the letter offered “false hope” to farmer shareholders that they could maintain 100 per cent control of the co-operative despite its large debts.
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He said the proposal from the shareholder group ignored the looming deadline imposed by Alliance’s banking syndicate for repayment of close to NZ$200 million (€99.5 million) by the end of the year.
“It assumes magically that there is a three-year extension by the banks that I am 100 per cent sure will not be provided.”
Mr Wynne also dismissed the letter’s projections for Alliance’s bottom line, rising from NZ$85 million in 2025/26 to NZ$212 million by the end of the decade.
“The numbers are not credible and what is really dangerous is that it is creating false hope.”
By simply voting down the Dawn deal without binding commitments from shareholders to provide additional funding, Wynne said the co-operative risked being left at the mercy of its bankers.
A former Beef + Lamb New Zealand chairman and signatory to the letter, Andrew Morrison, told The Irish Times he rejected the criticism of the financial assumptions contained in the letter, which had already been sent to Alliance’s banking syndicate.
“The reality is that the only way this is successful is if shareholders and banks consider the options.”
Alliance shareholders will vote on Dawn’s offer on October 20th.
