Silver Fern rejects PGG overtures

By Pattrick Smellie

Wednesday 18th February 2009

Silver Fern Farms has rejected PGG Wrightson's attempt to settle last year's failed merger with a $10 million compensation package.

Wrightson's shares had fallen a further 17% to $1 by mid-afternoon today, with SFF intent on taking the issues around the failed merger to the High Court, if necessary.

Wrightson offered a $10 million settlement "based substantially on delivery of the procurement and supply chain benefits that would have been achieved by the original partnership for the benefit of farmers" - an offer rejected SFF as a repackaging of the old procurement contract that existed prior to the merger talks.

Wrightson made an unconditional offer to SFF last August, but defaulted in October when funding lines for the transaction proved impossible to obtain, reflecting the rapid deterioration in world financial market liquidity over the latter months of 2008.

While SFF may consider taking up Wrightson's offer to mediation overseen by a retired High Court judge, SFF spokesman Brent Noble said the company was adamant that it would not accept $10 million as adequate compensation for the defunct merger.

The Grant Samuel report on the merger had identified synergy benefits of as much as $90 million a year, and Wrightson was confusing the issues by seeking to renegotiate procurement arrangements while ignoring Wrightson's claims to damages resulting from reneging on last year's unconditional offer.

Wrightson CEO Craig Norgate said the drivers behind the proposed merger - extracting greater value from New Zealand meat exports with a more coordinated approach to export markets - remained as urgent as ever.

"As the leading meat marketer and processor and the only nationwide full-service rural services provider, SFF and PGW have a major role to play in this regard," Norgate said.

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