Farmer-shareholders were given more information on a proposal for Irish company Dawn Meats Group to buy a 65% stake in their co-operative for $250 million.
They will be able to vote to accept or reject the proposal at a special meeting in Invercargill on October 20.
Sheep and beef farmer and Alliance shareholder Ben Dooley, of Mimihau, said a proposed rebate seemed “pretty insignificant”.
“I often wonder if we’re being bull……. .”
The deal should get shareholders more of their capital back, Mr Dooley said.
However, he expected to vote to accept the proposal to keep Alliance operational rather than face insolvency.
“It’s the lesser of two evils in my eyes. It’s either take a yes vote or lose it.”
Alliance Group chairman Mark Wynne said the new information included a report by Northington Partners.
“The independent report makes it crystal clear that the alternative options are very limited.”
If shareholders rejected the proposal, Alliance’s alternatives included asset sales, site closures and large cost reductions, raising capital from shareholders or other investors, or go into insolvency.
The report showed Dawn Meats’ offer was “without doubt” the best option presented and the only one to meet Alliance’s strategic and financial requirements, Mr Wynne said.
The sale proceeds would be used to reduce Alliance’s short-term working capital facility by about $200million, accelerate the board’s strategic capital expenditure programme and enable the distribution of up to $40 million to the co-operative, subject to livestock supply.
Under the proposed distribution, up to $20 million would be released from the joint venture company to the co-operative at the end of the 2026 financial year.
The co-operative would then distribute up to $20 million to shareholders with up to $9 million paid as a dividend and up to $11 million paid as a rebate.
Up to $20 million would be released as the second tranche from the joint venture company to the co-operative at the end of the 2027 financial year.
The co-operative would then distribute up to $15 million as a rebate to shareholders and retain up to $5 million in the co-operative for capital reinvestment.
The rebate was calculated on the average stock supplied over the prior two years, plus the current year and capped at level of shares held.
Northington Partners assessed the midpoint of Dawn Meats’ investment at a $1.18 per share, a 93% premium over Alliance’s own midpoint equity valuation, which represented “compelling value for shareholders”, Mr Wynne said.
A proposed governance arrangement meant the co-operative would hold two out of five directorships and would have veto rights for some major decisions.
“This safeguards the interests of our farmers, provides certainty and unlocks future value.”
For a deal to be accepted, at least 75% of shareholder votes must be in favour and all the votes of approval must represent a minimum of 50% of the total shareholding.
The deal then needs Overseas Investment Office approval.
