On Monday, Alliance farmer shareholders will vote on whether to sell a 65% stake in their co-operative for a total proposed cash investment of about $270m.
The special general meeting in Invercargill is not open to the media and the result will be announced the following day.
In a statement yesterday, Alliance chairman Mark Wynne said the additional investment was triggered by an agreed adjustment mechanism between Dawn Meats and Alliance which rewarded stronger-than-forecast year-end performance.
“Alliance’s unaudited year-end profit projection of between $18 million and $24 million is above the agreed profit target, and the company’s net debt position is lower than forecast.
“Under this adjustment mechanism, this means an additional $20m-$25m investment from Dawn. This is a strong endorsement of Alliance’s performance and the proposed partnership with Dawn. It recognises the hard work of our people in turning the business around and the loyalty of our farmers over the past 12 months,” he said.
As part of the purchase price negotiations with Dawn Meats in July, Alliance agreed to year-end profit and net debt targets.
Those were designed to give both Alliance farmer shareholders and Dawn Meats certainty; farmer shareholders about the $250m investment amount and Dawn Meats about the value of its proposed shareholding.
“Both parties recognised the potential volatility of trading conditions in the final quarter of the financial year and agreed an adjustment mechanism to account for over or under-performance against the targets,” he said.
The additional payment would be distributed as a dividend from the joint venture to the proposed Alliance Investment Co-operative and was in addition to the $40m in loyalty payments already signalled.
Mr Wynne urged farmer shareholders to vote on the deal, describing it as a once-in-a-generation decision for farmers.
The transaction required a minimum of 75% shareholder acceptance of those who vote, and greater than 50% of all shareholding voting yes at Monday’s meeting.
If shareholders did not support the investment, the Alliance board has previously said it would be obligated to enter into a process led by its banking syndicate, which might involve possible asset sales, site closures and further cost-reduction initiatives.
