Silver Fern seeks to raise up to $128m

Wednesday 1st July 2009

Silver Fern Farms, the meat cooperative that was the target of a failed investment proposal by PGG Wrightson, plans to raise as much as $128 million issuing new shares that will trade on the Unlisted market.

Chairman Eion Garden said he’s optimistic the capital restructure will win the 75% support needed at a shareholder meeting on July 30, with better earnings from red meat this year putting farmers in a more positive mood after three years of poor returns.

“I’m upbeat for the future of red meat – lamb and beef – because there’s going to be huge worldwide demand once the global recession turns around,” Garden told BusinessWire. “It’s going to require new strategies to capture that value.”

Prices for lamb have climbed this year on a worldwide shortage of livestock and a slide in the New Zealand dollar, which sank to below 50 US cents in March, from a record high above 80 cents 12 months earlier.

Garden said farmers need to be aware that 60% of this year’s price gains reflect the movement in the currency and the real opportunity to add value going forward is in development of a customer-focussed supply chain.

Plans to raise funds come after rural services company Wrightson was unable to complete a deal to invest $220 million in Silver Fern in exchange for a 50% stake. Wrightson has since settled with the meat processor.

Under the proposal, which needs support of 75% of shareholders, Silver Fern’s rebate shares and investment shares would be exchanged for new ordinary shares and participating farmers would then be able to subscribe for two more shares at $1 apiece.

The issue price would be payable in cash or deducted from livestock payments for up to three years, the cooperative said.

Shareholders could elect to acquire additional shares up to a cap of 5% it said. Those that take up the offer would also be entitled to one bonus share for each four held.

The new shares would trade on the Unlisted exchange platform, providing “a more transparent market-based share,” it said.

Garden said Silver Fern opted for Unlisted rather than the NZX because the nation’s main exchange had “a lot more complications and regulations.”

The cooperative has bonds that trade on the NZX debt market which mature in December 2010 and won’t be replaced, he said.

The South Island meat processor will trim its board to eight from 12, with five directors including the chairman to be elected by farmers. The remaining three would be independents.

Under the proposed restructuring, farmers will retain 60% of the voting rights and other shareholders will be restricted to a 5% holding, Silver Fern said in a statement.

Fresh equity would reduce debt funding requirements for Silver Fern. The cooperative plans a series of meetings with farmer shareholders in the run up to the special meeting at the end of July, where the proposals will be put to the vote.

Businesswire.co.nz

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