Silver Fern board backs China tie-up
Shanghai Maling is China’s leading meat processor and is 38% owned by Bright Food Group, the Chinese global food giant that owns brands including Weetabix. It has offered to take a 50% stake in the company.
Silver Fern chairman Rob Hewett said the board’s recommendation was that the two companies work together to grow a profitable long-term global business, providing sustainable returns to shareholders.
“Under the proposed deal, Shanghai Maling will invest NZ$261m in cash for half of Silver Fern Farms’ business,” said Hewett. “The board considered many options for new capital, both locally and internationally, but Shanghai Maling stood out for the enormous opportunities and ongoing benefits for the co-operative, its shareholders and supplying farmers.
Long-term benefits
“We are very excited by this partnership proposal with Shanghai Maling and believe they are the best partner for Silver Fern Farms. Our values are closely aligned. The proposed deal has many long-term benefits for the co-operative, including full support for our global plate-to-pasture strategy, and the means to accelerate the strategy in a number of key markets as a result of the investment of substantial new capital.
“This new partnership will see Silver Fern Farms in a cash-positive position at year end, which will allow us to both reinvest more aggressively in executing our strategy, but also to share profits via regular payments of dividends to the two shareholders and maintain competitive procurement prices for our livestock suppliers.
Dean Hamilton, chief executive of Silver Fern Farms, said Shanghai Maling brought not only capital but further access to the huge opportunities within China.
'Unique position'
“This has the potential for us to establish a unique position in what is the fastest-growing red meat market in the world,” Hamilton said. “Shanghai Maling’s integrated supply chain model will allow us to advance our product development and consumer marketing abilities in that market in ways we could not do ourselves, or with any other local or international investor.”
The investment is subject to shareholder approval by both parties and regulatory approvals in both New Zealand and China, but Hamilton said he expected the transaction to be completed in the first half of next year.
Hamilton said the cash injection would benefit the whole red meat chain in New Zealand. “What is clear is that the traditional industry model hasn’t consistently delivered for farmers or processors over a sustained period of time. Our shareholders and farmer suppliers believe in our added-value strategy, but the key missing link has been a strong financial position from which to execute.
“We have arrived at a position where we have a genuine game-changing opportunity for our business,” said Hamilton. “We have a partner who supports our strategy, wants us to accelerate, has the resources and relationships to help us specifically in China, and will provide us with significant capital to put us in a position of not only financial sustainability, but one of strength. It will enable us to reinvest in the business in a manner we simply cannot achieve by ourselves. The end result should be higher, and more stable, returns from the plate to the pasture.”
