Red meat processor Alliance Group is warning shareholders the co-operative risks financial collapse without agreement to an overseas investment deal.
Alliance has lost about $165 million in the last two years alone and now needs to pay back around $188-200m borrowed from six banks by December 19.
Irish company Dawn Meats is offering to buy a 65% stake for $250m to meet the banks’ deadline.
The remaining 35% of shares retained by farmers would later become unlisted stock exchange shares.
Urgent meetings were now taking place up and down the country, as shareholders vote on whether to take the Dawn Meats offer and end the co-operative model.
Alliance chair Mark Wynne told the Mosgiel shareholder meeting, the company had had “two shocking years of result – we find ourselves in a position of totally unsustainable debt”.
Low lamb prices, and over-capacity at meatworks in recent years have been key problems.
‘Future looks very bleak’
When asked what would happen if the Dawn Meats deal didn’t happen, Wynne told 1News: “We will have to go into re-negotiations with the banks but I think the future looks very bleak for Alliance.”
If the approximately $200 million can’t be paid back to banks on time, he said: “It is quite likely the board won’t be control at that point… It looks like the shareholders’ equity would be wiped out.”
Economist Cam Bagrie said losing the co-operative model to foreign investment was “a bit tough to swallow” for farmers.
“But I don’t think there are too many other options out there.”
Alliance Group employed 4000 people, with six plants around the country and was owned by 4300 farmer shareholders.
The Dawn Meats offer has obtained Overseas Investment Office approval.
The deal needed 75% of shareholder votes in favour, or more, and those voting in favour must represent 50% or more of the issued shares.
The result would be announced later this month.