Farmers prepare counter-proposal to Dawn Meats deal
With the Alliance board starting a series of roadshows next week to sell the Dawn Meats deal to shareholders, a group of farmers is working on a counter proposal.
Wynne, alongside chief executive Willie Wiese and other board members and executives, are now conducting a series of meetings with farmer shareholders, outlining the proposed deal ahead of a crucial vote on October 20.
Shareholders are being asked to approve a deal which would see Alliance lose its 100% co-operative status by selling a 65% stake to Ireland’s Dawn meats for $250 million. That would allow Alliance to pay off a $188 million debt to its bankers by mid-December, a deadline that has already been extended from the end of September.
Wynne spoke to Rural News following the meeting in Invercargill last week, the third meeting on the first day of the roadshow, where he and Wiese outlined details of the proposal to about 50 attendees. While many appeared undecided, some made it clear they would not support the proposal, and the pair faced some sharp questioning.
However, Wynne said he was excited about the dialogue.
“That’s the purpose of the meeting, to explore and understand exactly what’s on offer. What are the risks? What are the alternatives?
“But we really have no viable alternatives to meet the bank repayment requirements in the deadline that’s available to us.”
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The proposed deal would see Dawn take a controlling stake in a new joint venture company, although Alliance would maintain control over certain strategic and operational matters.
The current nine-member Alliance board would reduce to five under the constitution of a new Alliance Investment Co-operative – made up of three farmer-elected directors and up to two independents.
Two of those directors would then sit on the five-member board of a new Alliance Group Ltd joint venture, alongside three Dawn Meats appointees.
Wynne said an independent investment bank and corporate advisory business, Northington Partners, had assessed the path the board had taken to find a solution to its problems and found it “robust and comprehensive”.
“There’s only one credible offer to meet the banks’ requirements and timeline.”
He said the proposed partnership provided compelling value with significant strategic benefits to the shareholders beyond just paying off the debt. It would open new avenues for collaboration and growth though Dawn’s established expertise, especially in beef processing, and its established relationships with British and European markets.
Wynne said that a yes vote needed to meet a high threshold. Farmers representing at least 50% of all shares on issue needed to cast a vote, and 75% of the votes cast must vote yes.
Asked from the floor what a “no” vote would look like, he emphasised that whatever the result the board and management would do the very best they could with the cards they are dealt.
“But what will happen is that we will be called back in to negotiation with the banking syndicate, who will still make it very clear that the $200 million is due on the 19th of December.
“In that scenario, it is unlikely they will give us working capital facilities next year.”
Wynne said that the shareholders might then commit to come up with the cash as soon as possible, but he believed that would not happen.
More likely, the board would be forced to call in the receivers, or the banks would appoint an administrator.
At that point the banks would care only for the $188 million they were owed, while Dawn would say that because the farmers had voted no, then the company was not worth $250 million.
“And so, the probable outcome would be the administrators sell 100% of Alliance to Dawn for a lower price than we’ve got on the table for 65%.”
Some attendees at last week’s farmer meeting asked why a Dawn representative wasn’t available for questioning, but Wynne said the chance to engage directly with Dawn Meats’ chief executive Niall Brown would come in a webinar after the roadshow. The roadshow will head to the top of the Alliance catchment in Hawke’s Bay before concluding in Central Otago on October 14. The vote will be conducted at a Special General Meeting in Invercargill on October 20.
'We Must Save Our Co-op'
The Alliance Group’s return to profitability and farmers’ rosier financial position means the co-operative can be saved without the sale to Dawn Meats, says a group of Southland shareholders campaigning for a ‘no’ vote.
The group has gone public with a counterproposal launched with a full-page advertisement in Rural News and fliers which they are handing out to farmers attending each of the roadshow meetings.
Spokesman Dave Pinckney spoke at the Invercargill meeting, warning that “when the co-operative is gone, it’s gone”.
Pinckney emphasised his confidence in the current board and management to keep Alliance running if the shareholders reject the Dawn proposal.
“I repeat, I back these guys, with your support, to get a [banking] facility.
“We are talking to credible financial institutions of a scale to deal with this issue. You must take me on trust on that - we are talking to credible financial institutions as we speak.”
The group argues that Alliance has already turned the corner operationally, with EBITDA of $86 million in the financial year just ended, and farmers now in a better position to commit to a ‘modest’ capital call.
They propose a three-year debt repayment plan with a cash injection from shareholders of $5 per stock unit in the first year and retention of $2 per lamb equivalent thereafter, combined with staged repayment from projected profits and sell down of non-essential assets.
Alliance chief executive Willie Wiese said the board and management would do whatever they could to get best value for the shareholders but warned that if the Dawn meats proposal is rejected and they still haven’t found a solution by November, they would have to decide whether it would be reckless to continue trading or not.
“If the farmers vote ‘no’ and are happy to live with the risk of whatever the outcome is, that’s your choice, because it’s your business.”
The Southland farmers who have put their names to the proposal include former Beef+Lamb chairman Andrew Morrison, alongside Pinckney, James Anderson, Michael Wilkins, and Mark Gunton.
