Farmer shareholders in New Zealand’s largest meat processor Silver Fern Farms have accepted a NZ$261 million ($178 million, €157 million) investment by Shanghai Maling, a division of Chinese state-owned food giant Bright Food, in exchange for a 50 percent stake in the company.
The decision to sell a strategic stake in the business was approved by farmers who speak for 82.2 percent of voting rights, at a meeting with a 67 percent turnout, on Friday. The capital will be used to pay off Silver Fern Farms’ debts and boost its “plate-to-pasture” strategy, which focuses on identifying customer preferences and then tailors production to those needs.
Silver Fern represents more than 16,000 cattle, sheep and deer farmers across New Zealand. Holders of ordinary and rebate shares in the company will receive a dividend of NZ$0.30 per share if the deal goes ahead.
”I think we will be looking back at this date and saying, this was the genesis of the change in the red meat industry in New Zealand, certainly for Silver Fern Farms,” Silver Fern Farms chairman Rob Hewett said at a special meeting in Dunedin.
However, the deal presents a new challenge for New Zealand’s competition authorities and risks fresh controversy over Chinese investment in the country’s farming industry.
Last week, Chinese conglomerate Shanghai Pengxin said it would seek judicial review of the New Zealand government’s decision to block its takeover of Lochinver, the country’s largest single dairy farm. Meanwhile, Dakang New Zealand Farm Group, which is 55 percent owned by Pengxin, said it had dropped its bid to buy 10 farms from the Pinny family for a reported NZ$43 million because of delays at the Overseas Investment Office (OIO) and uncertainty that the deal would succeed.
New Zealand’s Labour opposition party branded the decision to sell the stake to the Chinese group as “deeply disappointing”. “This vote hands control of a New Zealand owned co-operative to a Chinese company with no guarantee of any benefits in the short, medium or long term. New Zealand farmers now face a decreasing number of opportunities to produce, process and brand what should be New Zealand’s proudest and most productive sector,” primary industries spokesman Damien O’Connor said.
Silver Fern Farms defended the deal and claimed that it will help the company achieve its goals more quickly, and give a springboard into the large and valuable Chinese market through Shanghai Maling’s network of 800 supermarkets and retail stores. It argued that the agreement was far superior to alternatives, including raising new equity from shareholders or a merger with rival cooperative Alliance Group.
The deal will now go before the OIO for approval, though the watchdog has come under pressure for its slow handling of recent cases. Silver Fern Farms said it is expecting to complete the transaction no later than June 30, 2016.