A group of Southland-based Alliance Group shareholders say the $250 million offer by an Irish meat company for a 65% stake in the co-operative appears to significantly undervalue the business, wiping out about $150m of shareholder equity.
In a letter to fellow shareholders, Michael Wilkins, Mark Gunton, James Anderson, Dave Pinckney and Andrew Morrison proposed an alternative plan to recapitalise Alliance, saying retaining full ownership by farmer shareholders was critical.
A two-week capital raise roadshow began in Tuatapere yesterday, Alliance leadership providing more details on the Dawn Meats Group deal ahead of a shareholder vote next month.
Those farmers pushing the alternative proposal accepted the co-operative needed to be recapitalised and believed their proposal could be successful.
They said the financial state of farmer shareholders had improved dramatically since earlier recapitalisation proposals were first raised.
Significant initiatives had been undertaken in “right sizing” the business and it had now returned to profit and there was a strong desire from farmers to retain the company’s proud legacy and history as a wholly farmer-owned co-operative, they said.
The group urged farmers to vote against the Dawn Meats proposal and support the alternative capital model, which proposed a shareholder capital injection in cash of $5 per stock unit and a sell-down of non-essential assets to raise capital of $60m in the first year, another sell-down of assets in year two along with retentions from processing sheets at $2/lamb equivalent and debt repayment from profits, followed by further debt repayment and processing sheet retentions in the third year.
Using the information available to shareholders, they estimated that meant $188m total funds to repay debt and a prospective surplus of about $55m over the two financial periods (2026-27) for capital expenditure.
The group had modelled “best of industry” advice, which suggested net profit after tax of $153m could be achieved in 2029-30.
Alliance has previously said if shareholders did not support the Dawn Meats offer, its board 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.
In their letter, the group said they understood farmers were worried the banks would take control of Alliance if the offer was not accepted.
“They have not had a credible alternative offer to consider until now. A strong message with a commitment of financial support is crucial to enable our proposal to succeed.
“Banks have been strong partners throughout [Alliance’s] history and with a renewed commitment from farmers, there is no reason this cannot continue,” they said.
