New Zealand’s largest livestock processing co-op sells 50% to China

A multinational meat co-operative from New Zealand will sell off half of the business to a private company after trading in the market for 67 years. Set up...

A multinational meat co-operative from New Zealand will sell off half of the business to a private company after trading in the market for 67 years. Set up in 1948, Silver Fern Farms Limited is the country’s largest livestock processing and marketing enterprise. The co-op is owned by over 16,000 sheep, deer and cattle farmers.

On 15 September the board announced it would recommend unanimously to its members to form a partnership with China’s largest meat processor, Shanghai Maling. Chair of Silver Fern Farms, Rob Hewett, said the 50/50 partnership with the Shanghai based company would help grow a long-term global business. The co-op has been affected by a collapse in the price of sheep meat prices.

Mr Hewett explained that existing ordinary shareholders would retain their current shares in the co-operative, while supplier shareholders would continue to supply their livestock through the co-operative. Silver Fern Farms can retain its original structure even with Shanghai Maling taking a 50% ownership stake. The two businesses will set up a new company in which the co-operative and Shanghai Maling would each have 50%.

“Under the proposed deal, Shanghai Maling will invest NZ $261m (£112.4m) in cash for half of Silver Fern Farms’ business,” said Mr Hewett. “The investment will be into a company, to be named Silver Fern Farms, which will own all of the assets of the business, and be owned 50% by the existing Silver Fern Farms Co-operative and 50% by Shanghai Maling.”

“In addition, the board of the co-operative plans to redeem the $5.5m (£2.4m) Supplier Investment Shares it has outstanding and pay a AUD $35m (£15.1m) special dividend to ordinary and rebate shareholders at the time of the transaction. This dividend will be a welcome return and one which will set expectations moving forward,” he added.

The new company, which would be debt-free, would also pay 50% of net profit in dividends to its shareholders. The deal implies a share value of NZD $2.84 compared to the current value of 35c.

The partnership between the two businesses follows a series of investments in agriculture by companies in China, which is the world’s biggest meat consumer.

Silver Fern Farms said they expected the co-operative to triple its revenues compared to 2014 as a result of the deal.

The governance structure of the new company will feature a 10 members board, with five each from Silver Fern Farms and Shanghai Maling. There will also be two co-chairs, Rob Hewett and the chair of Shanghai Maling.

Shanghai Maling is 38% owned by state-owned Bright Food Group, China’s largest food company. Bright is keen on pursuing acquisition of food producers around the world. The group has also acquired British cereal maker Weetabix and Australian dairy company Mundella Foods and it has a 40% stake in New Zealand infant formula processor Synlait. With this deal, Maling would become China’s biggest consolidates lamb and beef industrial group.

Following the board’s endorsement of the deal, farmer shareholders will be consulted and will be able to vote on it.

“The investment is subject to shareholder approval by both parties and regulatory approvals in both New Zealand and China. We expect the transaction to be completed in the first half of next year,” said Mr Hewitt in a press release.

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