Horowhenua StarAn Irish company plans to take a stake in Alliance Group, in a deal hailed as positive for the local Alliance plant and the farming industry.
Alliance’s Levin plant has 400 staff, making it the town’s biggest employer. There have been concerns about its future after Alliance ran into debt problems.
Dawn Meats Group, one of Europe’s biggest meat processors with annual revenue of $5.8 billion, wants to inject $250 million into the farmer-owned co-op, of which $200 million will be used to buy down short term debt, run up by the Alliance Group in the past two years.
“Our Levin plant continues to perform well, and with the successful recapitalisation of Alliance, we look forward to growing our business further,” says Alliance chief executive Willie Wiese. “Alliance will continue to focus on optimising our processing network and improving efficiency, in line with our strategic goal of ensuring livestock farming remains a commercially viable land-use option for our farmers.”
He believes Alliance’s plant network is well balanced between livestock volumes and processing capacity.
“We understand the importance of Levin to our farmer-shareholders, our people and the region, and we are committed to keeping them informed as this process progresses.”
Local Federated Farmers spokesperson Geoff Kane says the deal is positive for the industry.
“We have been very worried about the future of Alliance. We thought it would go under. All other farmer-owned co-ops have had to take on outside shareholders and cash to survive.
“We are very relieved they have found the capital needed.”
He says with currently high prices it’s a great time to be farmer. The price of beef is twice as high as it was two years ago.
Geoff says Dawn Meats is a great family-owned business with objectives similar to those of Alliance. It is strong in beef, and with Alliance strong in land and mutton it would be a good combination.
“It’s great news for Levin, for the staff of the local plants and all farmers, but a lot needs to happen before the deal is finalised.”
The deal is subject to shareholder approval. Then there are regulatory requirements that must be met, such as approval from the Overseas Investment Office
A road show will go around the country next month with a vote expected in mid October.
Alliance Group chair Mark Wynne says the board has fully endorsed the deal, which would enable distribution of up to $40 million to the co-operative.
“Alliance was built by farmers for farmers and has a proud co-operative legacy,” Mark says. “The process we have undertaken on behalf of our farmer-shareholders to meet our banks’ requirements means we are now a much fitter and stronger business.
“However, we need this investment to provide certainty and confidence, and ultimately unlock more value for our farmers.”
Mark said Alliance ran out of local options to solve its debt problem.
The transaction needs a minimum of 75 percent shareholder acceptance of those who vote, and more than 50 percent of all shareholders at a special general meeting in Invercargill mid-October. The co-op has 4300 shareholders. If shareholders don’t support the plan, Alliance might have to sell assets, close sites and take cost-reduction measures.
The proposed deal follows two years of pre-tax losses of more than $200 million, which resulted in the banks requiring Alliance to obtain an equity injection of a similar amount.
Initially the co-op looked to its shareholders to contribute through deductions from livestock payments. However, market conditions were not favourable. This was cancelled in December and the search for external capital was launched in February.
The current financial year has seen a dramatic improvement in market prices and is assumed to have seen Alliance return to profit, boosted by internal cost savings and the closure of the Smithfield meatworks in Timaru last year when a $52.5 million write-down adversely affected its result.
However sheep numbers are declining and the market is currently high.
“In the last 18-24 months, we have implemented a huge amount of change across every aspect of the business. This is an opportunity to lay an enduring foundation that will offer an opportunity for Alliance to thrive and deliver more value to our farmers,” Mark Wynne says.
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