Silver Fern ends accord with Wrightson on financing glitch

Monday 3rd November 2008

Silver Ferm Farms, the nation's biggest exporter of red meat, terminated an agreement to allow PGG Wrightson to buy a half stake in the cooperative after financing for the deal fell through.

Wrightson failed to make the initial $145 million payment of its $220 million purchase by the due date of October 1. The rural services company last week said there was no early prospect of securing the funds after it canceled a share sale because some of its banks couldn't guarantee the balance of the funding.

"Termination of the agreement was a necessary step to provide certainty to our shareholders and other stakeholders including employees and suppliers," Silver Fern's chief executive Keith Cooper said. "It enables us to move on and see whether any alternative arrangements between Silver Fern and PGW are feasible."

The deal's collapse marked one of the largest in New Zealand this year to be thwarted by the global credit squeeze. Silver Fern hasn't yet decided what compensation it may demand from Wrightson, which had agreed to the purchase as part of a strategy to manage procurement of stock to ensure top prices in export markets.

Even without the Wrightson deal, "aggregation within the wider meat industry, in combination with integrating the supply chain, remains fundamental to achieving that outcome," Cooper said.

Wrightson chairman Craig Norgate said his company "will continue discussions on the various options available."

"These include different shareholding options and the potential to work together on procurement and other business functions," Norgate said.

Wrightson shares traded unchanged at $1.70 and has dropped almost 40% in the past three months.

By Jonathan Underhill

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