Editorial: A new era for two co-ops

For Fonterra farmers, the equation is simple - vote yes to divest the co-op's consumer and related businesses and get a capital return of $2/share - a whopping $3.2 billion.

The vote, to take place at an online special general meeting on October 30, needs 50.1% support to pass. By all accounts, a yes vote is a shoe-in.

However, for meat co-op Alliance things are not as straightforward.

A $250m investment by Irish company Dawn Meats requires 75% support from voting farmer shareholders. With an alternative proposal doing the rounds, where shareholders will be asked to inject capital into the ailing meat processor to maintain its co-op status, a 75% yes vote for the Dawn Meats proposal could be too big a hill to climb.

Alliance bosses are delivering a stark warning to shareholders in meetings: vote yes to the Dawn Meats proposal or the company risks insolvency due to its level of debt.

They have also tabled before shareholders an independent advisory report by Northington Partners that assessed the midpoint of Dawn Meats' investment at $1.18/share - a 93% uplift on the midpoint share value for current Alliance versus Alliance post-investment.

Read More:

• Alliance Group faces crucial vote on Dawn Meats deal
• Farmers prepare counter-proposal to Dawn Meats deal
• Fonterra bosses' mission to sell the $4.2b divestment plan

Alliance must pay off a $188 million debt to its bankers by mid-December, a deadline that has already been extended from the end of September.

A no vote at the October 20th special general meeting would send management back to the banks to negotiate a new deal.

However, if the banks don't agree, Alliance won't have any working capital facilities next year. That could even signal the beginning of the end for a proud farmer-owned co-operative formed in 1980. Let's hope it doesn't come to that.

Over the next few weeks, shareholders of both co-ops - Fonterra and Alliance - will be thinking long and hard before casting their votes.

Whatever they decide will herald a new era for their respective co-operatives.