New Zealand meat processor Alliance Group continues to back company Dawn Meats’ offer of up to NZ $275 million (about €135 million) for 65 per cent of its shares despite being presented with an alternative recapitalisation plan with new overseas backing.
A number of Alliance shareholders have engaged in a rearguard action over the past month to defeat the Irish meat group’s bid and keep the New Zealand meat co-operative 100%-farmer owned.
Alliance chairman Mark Wynne has previously decried the shareholder group for giving the co-operative’s 4,300 farmer owners “false hope” and ignoring a December 19th deadline to pay back $188 million to the co-operative’s banks.
But with little more than 72 hours to go until a vote on Dawn’s offer, the rebel shareholder group yesterday presented a fresh proposal to Mr Wynne.
RM Block
The Irish Times understands the group presented “indicative funding offers” from at least two offshore entities – one a financial institution and the other nonfinancial.
The offers were for new debt to refinance a large chunk of Alliance’s existing bank loans should the Dawn bid be rejected by the co-operative’s shareholders on Monday.
Large-scale Southland farmer David Pinkney, one of the group opposing the Dawn Meats deal, said he could not reveal the identities of the new backers but said they were “credible” and bought time to roll out the rebel group’s proposal to pay off the co-operative’s debt over three years using a mix of retained earnings, land sales and farmer capital.
“We are confident, if there is a No vote, what we have pulled together will be material and significant in dealing with the $188 million [loan due] and then a plan rolling out over some years after that,” he said.
Another group member, and former chairman of the NZ Meat Board, Southland farmer Jeff Grant, said the funds were not guaranteed and still subject to the entities carrying out further due diligence.
But confirmation on Wednesday that Alliance will exceed profit targets agreed under its deal with Dawn Meats, triggering a $20 million-$25 million top-up to the Irish company’s $250 million offer, has firmed up interest from the entities from when approaches were first made a month ago.
“The reality is that it looks better than it did just two weeks ago and the information released yesterday just confirms how well the company has been turned around,” Mr Grant said.
However, Mr Wynne said the Alliance board remained unconvinced.
“The details remain confidential but, at first glance, it looks unlikely to satisfy the banks’ requirements,” Mr Wynne said. “There is a component of debt swap that makes it very challenging especially for ongoing working capital and debt covenants.”
Mr Wynne believes that Alliance’s current banking syndicate, still required for $250 million-$280 million in working capital to keep the business running in the coming year, will insist on the new loans being subordinated to theirs.
Higher interest payments overall were likely to follow, leading to further breaches of interest cover covenants, which the syndicate would be unlikely to tolerate for a second year in a row.
Furthermore, Mr Wynne said, he remained unconvinced that any more than 10 per cent of the co-operative’s farmers would be prepared to dip into their own pockets to recapitalise the business even given three years to do so.
“The board still unanimously recommends supporting the Dawn proposal,” he said.
