An alternative proposal to retain 100% farmer ownership of Alliance Group is not credible in the time-frame set by the company’s banking partners, chairman Mark Wynne says.
Five Southland farmers have written to fellow shareholders outlining a plan to recapitalise Alliance, rather than selling a 65% stake to Irish company Dawn Meats Group for $250 million which is proposed subject to shareholder approval.
Yesterday, Mr Wynne said the new proposal risked giving farmers “false hope”, adding those behind it did not have access to the full financial information, much of which was commercially sensitive.
“To meet today’s banking requirements, farmer-shareholders would need to provide Alliance with immediate cash. A shareholder with 50,000 shares would have to contribute approximately $100,000 now.
“Few can afford, or are willing, to commit that level of capital. The fewer that contribute, the greater the burden on those who do,” he said.
When Alliance sought new capital from farmer shareholders last year, uptake was very limited which was why the board had to look for external capital.
Over the past two years, Alliance had explored “every possible option” including banks, food companies, sovereign wealth funds, private equity and farmers, he said.
None could deliver the scale of capital required within the timeframe demanded by its banks.
“The banks have been crystal clear that Alliance’s $188m-$220m working capital facility must be repaid in full, in cash, by the end of this year. No extensions will be granted.
“The independent report by Northington Partners, prepared for shareholders, is clear that the Dawn Meats proposal is a good deal. It provides the capital we need now, strengthens the company and positions Alliance for growth. It also states that a ‘no’ vote carries very real risks, including the possibility of insolvency.
While some farmers might point to higher livestock prices and improved profitability as a reason to wait, stronger markets would not repair Alliance’s balance sheet or satisfy the banks.
“Two tough seasons have left Alliance exposed, and profit alone cannot repay a facility of this size by year-end,” he said.
Alliance continues its series of roadshows to outline the Dawn Meats proposal with meetings in Wyndham, Heriot and Balclutha today and Mosgiel, Oamaru and Fairlie tomorrow, before heading north. Roadshows will be held in Alexandra and Middlemarch on October 14.
