By Guest writer,Mark Wynne. Wynne
Copyright farmersweekly
Reading Time: 3 minutes
By Mark Wynne. Wynne is chair of the Alliance Group.
Alliance farmer-shareholders are facing the most important decision in the company’s 77-year history.
Over the past two years, Alliance has lifted its performance on the back of a refreshed strategy and a return to a back-to-basics approach.
Alliance is now a leaner, fitter, stronger business, and on track to return to profitability this year – a testament to the resilience of our farmers and the hard work of our team.
But progress alone is not enough. At this critical juncture, Alliance must re-capitalise its balance sheet. The Dawn Meats proposal provides that opportunity – not simply to survive, but to thrive.
The Scheme Booklet now with farmer-shareholders sets out the full details, including Northington Partners’ independent adviser’s report. It analyses the proposal’s structure, financial implications and alternatives. I urge every shareholder to read it carefully.
The Dawn Meats proposal delivers clear and immediate benefits: $250 million of immediate cash injection, a stronger balance sheet, restored confidence from our banks and a platform for sustainable growth.
Importantly, Dawn brings much more than debt repayment. Dawn adds balance sheet strength, global market access, processing expertise in beef and complementary customer channels.
Combined with Alliance’s leadership in lamb and established access into China, wider Asia and North America, this partnership will unlock significant commercial and operational synergies. It will enable us to extract more value in the market while protecting the jobs of our 4300 employees.
The independent adviser reinforces the value of the Dawn proposal. Northington Partners’ midpoint valuation of Dawn’s investment is $1.18 per share – a 93% premium over the current Alliance equity valuation. That is an attractive price and a strong endorsement of Alliance’s potential.
Equally important are the governance protections built in. The co-operative, through its 35% retained stake, would hold two of five directorships on the new Alliance board and have veto rights over a number of key decisions.
Some farmers have suggested what they believe are alternatives, such as asking shareholders once again to make capital contributions, sell company assets or retain profits to repay debt.
These ideas are not credible in the repayment time frame our banking partners have provided us, and in my view, they also give farmers false hope.
These farmers do not have access to the full financial picture, much of which is commercially sensitive and subject to bank confidentiality.
To illustrate, to meet today’s requirements, farmer-shareholders would have to immediately pay cash to Alliance. A shareholder with 50,000 shares would need to contribute approximately $100,000 right now.
Few can afford this or are willing to commit to it. The fewer farmers who contribute, the larger the commitment required from each participating farmer.
When farmers were invited to provide new capital last year, uptake was limited, which is why the board had to look externally.
Over the past 12-18 months we have exhausted every option. We engaged with banks, other food companies, sovereign wealth funds, private equity and farmers.
None could deliver the capital required within the time frame set by our banks. The banks have been unequivocal: our $188m-$220m working capital facility must be repaid in full, in cash, by the end of the year.
No extensions will be granted.
Northington Partners’ assessment is clear: the Dawn Meats proposal is the best option available. It addresses our immediate capital need, strengthens the company, enhances operational capability and positions Alliance for future growth.
Just as clearly, the report highlights the risks of a “No” vote – including the real possibility of insolvency.
Some may point to rising livestock prices as a reason to delay. While welcome, stronger markets do not repair the balance sheet or satisfy the banks. Two difficult seasons have left Alliance exposed, and profit alone cannot repay a facility of this scale by the end of the year.
The Dawn Meats proposal delivers the capital and certainty Alliance needs to thrive with a complementary partner that shares our values and brings operational excellence.
It secures our banking relationships, protects thousands of jobs, keeps Alliance globally competitive and gives farmer-shareholders the opportunity to grow the value of their 35% stake over time.
At the beginning of this process, it was the board’s strong preference to remain 100% farmer-owned, but without $200m-plus of shareholder cash investment, we had no choice but to seek external investment.
The alternative is stark: a bank-led process involving forced asset sales, site closures and widespread job losses. There is no middle ground.
I urge every shareholder to read the Scheme Booklet, consider the independent adviser’s report, attend one of the upcoming roadshow meetings and take part in this crucial decision.
