Copyright farmersweekly
Reading Time: 2 minutes A major European rendering company is understood to have been one of the two mystery backers of a last-ditch attempt by a group of Alliance shareholders to keep the meat co-operative 100% farmer owned. The group of high-profile shareholders presented an alternative recapitalisation plan to Alliance’s board just 72 hours before the final vote last month on Irish company Dawn Meats’ $270 million offer for 65% of the co-operative. At the time Alliance chair Mark Wynne dismissed the plan as “largely” a debt swap, saying it offered shareholders “false hope” of retaining control had Dawn’s offer been voted down by shareholders. While the plan would have largely dealt with a December 19 deadline for the repayment of $188m of term debt, Wynne said, the co-operative would have continued to be severely indebted, most probably breeching interest cover ratios set by its banks for a second year in a row, and possibly leaving Alliance unable to secure the estimated $250m-$280m in bank working capital required to be competitive in the local livestock market for the coming season. By comparison, Dawn’s offer cleared the co-operative’s debt, leaving funds to re-invest. The Irish company’s United Kingdom and European market contacts was a further factor in its favour. Farmers Weekly understands the shareholder group presented two “indicative offers” to the Alliance board on the Friday before the vote. A third offer was also being worked on. It is understood one of the confirmed offers was from Italian rendering giant SAPI, which was prepared to pay cash for Alliance’s rendering operations. The Italian company, which employs 1800 people globally and already has a presence in New Zealand though a joint venture with North Island-based Wallace Corporation, would have also provided a loan to Alliance to help refinance its bank debt. The second offer presented is understood to have come from an offshore financial institution and was for debt funding only. Both loans would have been paid off over three years from a mix of new shareholder capital, retained earnings and asset sales, as per the letter sent by the shareholder group to Alliance’s 4300 shareholders in mid-September. One source said the offers were short of the $188m needed to meet the December 19 deadline but were “not far off”. Furthermore, the cash from the sell-off of Alliance’s rendering plants amounted to a “reasonable proportion” of the debt coming due in December and would have provided at least some of the equity the Alliance board was in search of. The source understood the indicative offers included loan terms favourable to Alliance. “There would have been a reduction in interest costs as interest rates are lower this year and [SAPI] had an interest in seeing the co-operative survive because they wanted the rendering product.” A spokesperson for the shareholder group, Southland farmer Jeff Grant, said the last-minute nature of their campaign had worked against revealing the identity of the backers. Without access to the detailed financial and operational information provided to interested parties earlier in the fundraising process, further scrutiny of the Alliance business would have been required before the two offshore parties committed to funding. Revealing their identities would have been detrimental to their reputations should they have walked away from a deal following the completion of their due diligence. “When you are up against the wall you have to move quickly and be careful about how you do that and that is part of the reason why we can’t disclose [the identity of the backers],” Grant said. Neither SAPI nor a local representative responded to requests for comment.
