Fed Farmers carefully considering Chinese bid

  • 16/09/2015

Silver Fern Farms' shareholders are being urged to carefully consider a Chinese bid for a 50 percent stake in the co-operative.

Shanghai Maling Aquarius put in an offer on Tuesday to inject $261 million in capital for half of the country's largest meat exporter.

The total deal will be worth around $331m.

The government has endorsed the offer but Federated Farmers says the details need to be worked through carefully.

"There are a lot of factors that will ultimately determine whether this is the right deal for shareholders," said federation president William Rolleston.

"Not all of them are clear from what has been announced... key questions include what value has been placed on Silver Fern Farms' significant body of intellectual property and whether a strong emphasis on the Chinese market will prove restrictive if that market weakens."

Opponents of the deal say they'll continue to push for a locally funded alternative.

An alternative funding proposal from a group of New Zealand agribusiness companies to underwrite a rights issue for between $40m and $50m was rejected by Silver Fern's bankers, but the group planned to make an amended proposal with a "substantially" increased level of underwrite, said one of the organisers, Wanaka-based businessman John Rodwell.

There was still a "real option" for Silver Fern shareholders that would retain ownership in New Zealand hands, he said.

Prime Minister John Key says the deal is "potentially very good" and will mean a significant capital injection into a company that has carried debt for a long time.

Mr Key says it's a vote of confidence in New Zealand industry and will give Silver Fern Farms an opportunity to improve their access to the huge Chinese market.

It's been heralded as a game-changer for Silver Fern Farms by chairman Rob Hewett with the board unanimously recommending shareholders take the deal.

"I don't think there is any doubt our strategy is the right strategy," he said.

"We're going to be unleashed and the capital they're providing will be able to do that."

As part of the deal, the Chinese firm will help Silver Fern Farms wipe out all of its debt while providing further investments to strengthen its balance sheet.

"By end of financial year we will have no debt, there will be money in the bank," he said.

"It will turbocharge our Chinese strategy, there's no doubt about that."

As a sweetener, a special dividend of 30 cents a share will be paid to shareholders.

The company also outlined plans to return half of their annual net profit to shareholders through rebates and dividends.

Shanghai Maling Aquarius manufactures and markets canned food, bottled water, flavourings, frozen food, and other related products with more than 800 supermarkets across China.