August 11, 2025 • 9 mins
The chairman of the Alliance Group outlines the plan to recapitalise the beleaguered meat cooperative with the announcement of the proposed sale of 65% of the company to Irish meat company Dawn Meats for $250 million.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Well.
Speaker 2 (00:00):
As promised, the worst kept secret in the meat industry
was out this morning. Irish company Dawn Meats will acquire
sixty five percent of the Alliance Group for two hundred
and fifty million dollars. The pundits and the Irish Times
weren't wrong. They were saying seventy percent for two hundred
and seventy million dollars. Mark Win's the chair person of
(00:22):
the Alliance Group. Mark Did the Irish get a bargain here?
Speaker 3 (00:26):
Yeah?
Speaker 4 (00:26):
Good, i'veter known, Jamie. I think the proposal on the
table is a fair deal. It values Alliance Group at
just over five hundred million dollars posts the injection of
their capitals, which I think in an industry worth declining
livestock flows and too much capacity, and with Alliance specifically
(00:48):
carrying so much debt, I think it's a fair deal
for Dawn and a good deal for Outhioelder.
Speaker 2 (00:54):
Okay, if the company's worth just over half a billion
dollars five hundred and two million, why didn't they pay
three hundred and twenty five million for a sixty five
percent stake? Because that's how the maths works.
Speaker 4 (01:08):
So I think we're confusing enterprise value with equity value.
So at an enterprise value level including ongoing average debt
of working capital for the season, which we've assumed about
one hundred and eighteen million dollars, that puts the enterprise
value at five hundred and two million.
Speaker 2 (01:26):
Thanks for the explanation. Were there any other real suitors?
Speaker 4 (01:32):
Well, the process we went through started with fifty qualified
potension investors from both the domestic market and international, so
that was passing the net really wide. We had a
set of criteria that we worked through. Many of those
self selected, particularly around livestock numbers declining in New Zealand
(01:53):
and too much capacity. So we ended up with six
non binding indicative offers, and then that down to three,
and then through the process we ended up with one,
which is Dawn Meats.
Speaker 2 (02:05):
Was one of those three silver firm farms.
Speaker 4 (02:08):
I'm not in a position to say who was in
the operation the catchment if you like or not, but
it was a combination of both domestic and international.
Speaker 2 (02:18):
Is this sort of Hobson's choice? This is the best
option out of some bad ones, because obviously the best
option would be to retain one hundred percent farmer co
op ownership, but that was never going to happen, even
though some of your biggest shareholders were encouraging you to
have a crack at that. Was that ever a serious option?
Speaker 3 (02:37):
Oh?
Speaker 4 (02:37):
Absolutely, that was not just a serious option. That was
our preferred option. So middle of last year we kicked
off a capital raise from our shareholders, but acknowledged that
this is a terrible time because while Alliance was hurting,
our farmers were also hurting. So what we made clear
at the time was there are three options in front
(02:58):
of us. Number one in preferred as one hundred percent
farmer owned. If we can't get that capital, then in
the timeframe that we have, then we have to move
into a joint venture type discussion and look for external
capital or potentially sale of one hundred percent of the company.
Speaker 3 (03:16):
So here we are. We're in option two, which is a.
Speaker 4 (03:20):
Joint venture, and the board's challenge is to make sure
that we get a good, fair deal for our shareholders,
and that's what we believe unanimously is represented by the
Dawn offering that we talked about today.
Speaker 2 (03:32):
So you're getting two hundred and fifty million. I think
a couple one hundred million of that's going to be
used to repay debt. There's forty million there to go
to the cooperative subject to shareholder livestock supply. So what
does that actually mean? How does this now value my
alliance share? Or if I'm a farmer, my one dollar
(03:52):
Alliance share, what's it worth right now under this proposal?
Speaker 4 (03:56):
Okay, so two parts you question there. So first one
look take on the good valuation. So with six two
hundred and fifty million coming in from Dawn for sixty
five percent, that by a calculation values our farmer equity
at for the thirty five percent at one hundred and
(04:17):
thirty five million, and we carry forward one hundred and
eighteen million of average seasonal working capital debt, putting the
enterprise value at five hundred and two million. That has
an implied share value from the one dollar current which
is a nominal share of one dollar twenty six cents.
So that is a twenty six percent uplist on the
(04:40):
current share.
Speaker 2 (04:41):
Mark in the early nineteen nineties. Believe it or not,
I was an Alliance farmer shareholder. Cost me a dollar
to buy my shares in the late eighties. It's not
a very good capital gain over thirty or forty years.
Speaker 4 (04:54):
No, And that is one of the challenges of the
nominal share process for cooperatives. So the other key change
we've made to here, Jamie, is that going forward, the
proposal is that as the shares move from the current
alliance into Alliance Investment Cooperative, so we have to move
the shares one for one because Dawn can't invest in
(05:15):
the cooperative directly. So the new cooperatives the shares will
change from nominal one dollar to ordinary shares and those
shares would now be listed on the unlisted sock Exchange
like a couple of the other cooperatives in New Zealand.
So benefit of that. First of all, there's a trading platform.
You don't have to apply for redemption and have a
(05:36):
five year wag period to get your money out. The
farmers will determine the price, so the trading can only
be amongst the shareholders, but they will determine the price.
But our starting point is based on the two hundred
and fifty million proposal from Dawn. Those shares are worth
one dollar twenty six.
Speaker 2 (05:53):
Are you going to face the run on the bank.
Speaker 3 (05:56):
No, I don't think so. No.
Speaker 4 (05:57):
I think if that was happening, we would have already
face that. And we are We've done an enormous amount
of work on Alliance over the last twenty four months
to bring us back into a forecast profit this year.
So after two years of massive loss, the turnaround is
going well. We're back into profit and the future is
(06:19):
looking pretty good from here.
Speaker 2 (06:21):
How badly did of the Alliance Group previous management? Not you,
I respect that you've only been in the job for
a year or so, get it wrong.
Speaker 1 (06:30):
Look, I think what we've done is we've gone all
the way back to basics, simple strategy, clearly articulated, high
levels of accountability, and the metrics are all around the
basic value drivers.
Speaker 4 (06:46):
There's no rocket science here. This is just a lean,
mean cost structure, really focused on how we sell, how
we process, and.
Speaker 2 (06:54):
Are you going to become a pure cooperative in the
sense that you'll treat all your shareholders equally, because that
is one of the big gripes with the Alliance Group,
that it's different deals for different folks, especially third party traders.
Speaker 4 (07:08):
Yeah, we thrashed all of these issues out at our
numerous woolshed meetings last year. I promised then that we
would address the issues by the first of October, and
by and large that noise has disappeared.
Speaker 3 (07:22):
Do we still use third parties? Yes, we do.
Speaker 4 (07:26):
I hasten to add at a much smaller percentage of
our supply than some of our competitors, which is a
surprise to many. And what we have also done is
made sure that the third parties do not have an
advantage price wise over our own staff.
Speaker 3 (07:42):
So those are the two issues.
Speaker 4 (07:43):
We addressed them by the first of October, and that
noise is by and large totally okay.
Speaker 2 (07:49):
The meat industry structure, is it basically flawed? I know
we can't do the mega merger that has been talked
about for years. But you must look inviously, mark one.
Because you've got a big corporate background, are you were,
of course the chief executive of Balance Agri Nutrients. You
must look at the industry structure for the dairy and
say Kiwi fruit industries, and you must look at it
(08:09):
with envy.
Speaker 4 (08:13):
They're very different structures, Jamie, that's for sure.
Speaker 3 (08:16):
If you look.
Speaker 4 (08:16):
At dairy with Fonterra and Keywy fruit with the zest breed,
they are of course government mandated monopolies.
Speaker 3 (08:23):
Effectively, the meat industry.
Speaker 4 (08:26):
Does not enjoy that status, and so we have a
very large number of processes. I mean it's probably about
forty export licensed processes, certainly with the Big four making
up most of it. It's brutal and is there opportunity
over time to look at how collaboration and consolidations can
(08:46):
take place. Short Absolutely, and we're open to all of that.
But to be clear, it has to be done on
commercial terms and that is really where we want to go.
So both myself and Reilly, we have reached out to
the other big players to talk about how we can
collaborate with inside the Commerce Commission rules to create values
(09:09):
for value for our collective partners. But our immediate priority
is to get this proposal through the process, have our
farmer's vote and hopefully we were in a stronger position,
and then we can move into those further discussions.
Speaker 2 (09:25):
Mark Gwin, Chairman, chairperson of their Lines Group. Thanks for
your time. I meant to study for the meat industry.
Speaker 3 (09:30):
Thanks, Amy, appreciate it.
Well.
Speaker 2 (00:00):
As promised, the worst kept secret in the meat industry
was out this morning. Irish company Dawn Meats will acquire
sixty five percent of the Alliance Group for two hundred
and fifty million dollars. The pundits and the Irish Times
weren't wrong. They were saying seventy percent for two hundred
and seventy million dollars. Mark Win's the chair person of
(00:22):
the Alliance Group. Mark Did the Irish get a bargain here?
Speaker 3 (00:26):
Yeah?
Speaker 4 (00:26):
Good, i'veter known, Jamie. I think the proposal on the
table is a fair deal. It values Alliance Group at
just over five hundred million dollars posts the injection of
their capitals, which I think in an industry worth declining
livestock flows and too much capacity, and with Alliance specifically
(00:48):
carrying so much debt, I think it's a fair deal
for Dawn and a good deal for Outhioelder.
Speaker 2 (00:54):
Okay, if the company's worth just over half a billion
dollars five hundred and two million, why didn't they pay
three hundred and twenty five million for a sixty five
percent stake? Because that's how the maths works.
Speaker 4 (01:08):
So I think we're confusing enterprise value with equity value.
So at an enterprise value level including ongoing average debt
of working capital for the season, which we've assumed about
one hundred and eighteen million dollars, that puts the enterprise
value at five hundred and two million.
Speaker 2 (01:26):
Thanks for the explanation. Were there any other real suitors?
Speaker 4 (01:32):
Well, the process we went through started with fifty qualified
potension investors from both the domestic market and international, so
that was passing the net really wide. We had a
set of criteria that we worked through. Many of those
self selected, particularly around livestock numbers declining in New Zealand
(01:53):
and too much capacity. So we ended up with six
non binding indicative offers, and then that down to three,
and then through the process we ended up with one,
which is Dawn Meats.
Speaker 2 (02:05):
Was one of those three silver firm farms.
Speaker 4 (02:08):
I'm not in a position to say who was in
the operation the catchment if you like or not, but
it was a combination of both domestic and international.
Speaker 2 (02:18):
Is this sort of Hobson's choice? This is the best
option out of some bad ones, because obviously the best
option would be to retain one hundred percent farmer co
op ownership, but that was never going to happen, even
though some of your biggest shareholders were encouraging you to
have a crack at that. Was that ever a serious option?
Speaker 3 (02:37):
Oh?
Speaker 4 (02:37):
Absolutely, that was not just a serious option. That was
our preferred option. So middle of last year we kicked
off a capital raise from our shareholders, but acknowledged that
this is a terrible time because while Alliance was hurting,
our farmers were also hurting. So what we made clear
at the time was there are three options in front
(02:58):
of us. Number one in preferred as one hundred percent
farmer owned. If we can't get that capital, then in
the timeframe that we have, then we have to move
into a joint venture type discussion and look for external
capital or potentially sale of one hundred percent of the company.
Speaker 3 (03:16):
So here we are. We're in option two, which is a.
Speaker 4 (03:20):
Joint venture, and the board's challenge is to make sure
that we get a good, fair deal for our shareholders,
and that's what we believe unanimously is represented by the
Dawn offering that we talked about today.
Speaker 2 (03:32):
So you're getting two hundred and fifty million. I think
a couple one hundred million of that's going to be
used to repay debt. There's forty million there to go
to the cooperative subject to shareholder livestock supply. So what
does that actually mean? How does this now value my
alliance share? Or if I'm a farmer, my one dollar
(03:52):
Alliance share, what's it worth right now under this proposal?
Speaker 4 (03:56):
Okay, so two parts you question there. So first one
look take on the good valuation. So with six two
hundred and fifty million coming in from Dawn for sixty
five percent, that by a calculation values our farmer equity
at for the thirty five percent at one hundred and
(04:17):
thirty five million, and we carry forward one hundred and
eighteen million of average seasonal working capital debt, putting the
enterprise value at five hundred and two million. That has
an implied share value from the one dollar current which
is a nominal share of one dollar twenty six cents.
So that is a twenty six percent uplist on the
(04:40):
current share.
Speaker 2 (04:41):
Mark in the early nineteen nineties. Believe it or not,
I was an Alliance farmer shareholder. Cost me a dollar
to buy my shares in the late eighties. It's not
a very good capital gain over thirty or forty years.
Speaker 4 (04:54):
No, And that is one of the challenges of the
nominal share process for cooperatives. So the other key change
we've made to here, Jamie, is that going forward, the
proposal is that as the shares move from the current
alliance into Alliance Investment Cooperative, so we have to move
the shares one for one because Dawn can't invest in
(05:15):
the cooperative directly. So the new cooperatives the shares will
change from nominal one dollar to ordinary shares and those
shares would now be listed on the unlisted sock Exchange
like a couple of the other cooperatives in New Zealand.
So benefit of that. First of all, there's a trading platform.
You don't have to apply for redemption and have a
(05:36):
five year wag period to get your money out. The
farmers will determine the price, so the trading can only
be amongst the shareholders, but they will determine the price.
But our starting point is based on the two hundred
and fifty million proposal from Dawn. Those shares are worth
one dollar twenty six.
Speaker 2 (05:53):
Are you going to face the run on the bank.
Speaker 3 (05:56):
No, I don't think so. No.
Speaker 4 (05:57):
I think if that was happening, we would have already
face that. And we are We've done an enormous amount
of work on Alliance over the last twenty four months
to bring us back into a forecast profit this year.
So after two years of massive loss, the turnaround is
going well. We're back into profit and the future is
(06:19):
looking pretty good from here.
Speaker 2 (06:21):
How badly did of the Alliance Group previous management? Not you,
I respect that you've only been in the job for
a year or so, get it wrong.
Speaker 1 (06:30):
Look, I think what we've done is we've gone all
the way back to basics, simple strategy, clearly articulated, high
levels of accountability, and the metrics are all around the
basic value drivers.
Speaker 4 (06:46):
There's no rocket science here. This is just a lean,
mean cost structure, really focused on how we sell, how
we process, and.
Speaker 2 (06:54):
Are you going to become a pure cooperative in the
sense that you'll treat all your shareholders equally, because that
is one of the big gripes with the Alliance Group,
that it's different deals for different folks, especially third party traders.
Speaker 4 (07:08):
Yeah, we thrashed all of these issues out at our
numerous woolshed meetings last year. I promised then that we
would address the issues by the first of October, and
by and large that noise has disappeared.
Speaker 3 (07:22):
Do we still use third parties? Yes, we do.
Speaker 4 (07:26):
I hasten to add at a much smaller percentage of
our supply than some of our competitors, which is a
surprise to many. And what we have also done is
made sure that the third parties do not have an
advantage price wise over our own staff.
Speaker 3 (07:42):
So those are the two issues.
Speaker 4 (07:43):
We addressed them by the first of October, and that
noise is by and large totally okay.
Speaker 2 (07:49):
The meat industry structure, is it basically flawed? I know
we can't do the mega merger that has been talked
about for years. But you must look inviously, mark one.
Because you've got a big corporate background, are you were,
of course the chief executive of Balance Agri Nutrients. You
must look at the industry structure for the dairy and
say Kiwi fruit industries, and you must look at it
(08:09):
with envy.
Speaker 4 (08:13):
They're very different structures, Jamie, that's for sure.
Speaker 3 (08:16):
If you look.
Speaker 4 (08:16):
At dairy with Fonterra and Keywy fruit with the zest breed,
they are of course government mandated monopolies.
Speaker 3 (08:23):
Effectively, the meat industry.
Speaker 4 (08:26):
Does not enjoy that status, and so we have a
very large number of processes. I mean it's probably about
forty export licensed processes, certainly with the Big four making
up most of it. It's brutal and is there opportunity
over time to look at how collaboration and consolidations can
(08:46):
take place. Short Absolutely, and we're open to all of that.
But to be clear, it has to be done on
commercial terms and that is really where we want to go.
So both myself and Reilly, we have reached out to
the other big players to talk about how we can
collaborate with inside the Commerce Commission rules to create values
(09:09):
for value for our collective partners. But our immediate priority
is to get this proposal through the process, have our
farmer's vote and hopefully we were in a stronger position,
and then we can move into those further discussions.
Speaker 2 (09:25):
Mark Gwin, Chairman, chairperson of their Lines Group. Thanks for
your time. I meant to study for the meat industry.
Speaker 3 (09:30):
Thanks, Amy, appreciate it.
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