Silver Fern layoffs good for Alliance, bad for PGG deals
By Mitchell Hall
Tuesday July 22 2008 - 12:29pm
Keith Cooper. Photo: NZPA/John McCombe
Silver Fern farms shedding potentially 250 jobs means overcapacity concerns regarding an Alliance group merger have been addressed, and the PGG Wrightsons deal looks ever more distant.
Two sheep and lamb slaughter plants in Canterbury are to be shut following an announcement this morning by Silver Fern farms.
Silver Fern Farms chief executive Keith Cooper said closure was the final instalment of its Project Rightsize for 2008, designed to align processing capacity with reduced supply.
NBR analyst Hugh Stringleman says that this means the proposed PGG Wrightson takeover looks less likely than it did initially, because “Farmers’ returns from lamb and beef are going up virtually day by day, and if Silver Fern can do all this rationalisation on its own, why does it need Pyne Gould Guinness Wrightson to assist?”
Silver Fern’s move will address previous Alliance concerns about debt, exposure and overcapacity.
“The better outcome for farmers would be to retain 100 percent cooperative ownership and do the merger with Alliance”, said Mr Stringleman.
A non cooperative investor such as Pyne Gould Guinness would have to stay under a 40 percent shareholding in order for a co-op to retain its cooperative status.
However, Mr Stringleman pointed out that if the PGG Wrightson proposal with Silver Fern went ahead - with the Alliance merger occurring afterwards, farmers would then get back up to around 75 per cent ownership, recovering cooperative status.
Alliance group has not shown any warmth at all to PGG Wrightson’s overtures though, and farmers are even less likely to be won over, with a 75 percent ‘yes’ vote required for any PGG Wrightson deal to proceed.
Tuesday July 22 2008 - 12:29pm
Keith Cooper. Photo: NZPA/John McCombe
Silver Fern farms shedding potentially 250 jobs means overcapacity concerns regarding an Alliance group merger have been addressed, and the PGG Wrightsons deal looks ever more distant.
Two sheep and lamb slaughter plants in Canterbury are to be shut following an announcement this morning by Silver Fern farms.
Silver Fern Farms chief executive Keith Cooper said closure was the final instalment of its Project Rightsize for 2008, designed to align processing capacity with reduced supply.
NBR analyst Hugh Stringleman says that this means the proposed PGG Wrightson takeover looks less likely than it did initially, because “Farmers’ returns from lamb and beef are going up virtually day by day, and if Silver Fern can do all this rationalisation on its own, why does it need Pyne Gould Guinness Wrightson to assist?”
Silver Fern’s move will address previous Alliance concerns about debt, exposure and overcapacity.
“The better outcome for farmers would be to retain 100 percent cooperative ownership and do the merger with Alliance”, said Mr Stringleman.
A non cooperative investor such as Pyne Gould Guinness would have to stay under a 40 percent shareholding in order for a co-op to retain its cooperative status.
However, Mr Stringleman pointed out that if the PGG Wrightson proposal with Silver Fern went ahead - with the Alliance merger occurring afterwards, farmers would then get back up to around 75 per cent ownership, recovering cooperative status.
Alliance group has not shown any warmth at all to PGG Wrightson’s overtures though, and farmers are even less likely to be won over, with a 75 percent ‘yes’ vote required for any PGG Wrightson deal to proceed.
Labels: layoffs, New Zealand, Silver Fern Farms
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