Jamie Mackay: The Country host on Dawn Meats lining up to buy 65 percent of Alliance Group

Meat processor Alliance Group says Dawn Meats is lining up to pay $250 million for a 65 percent stake in the meat co-op.

Alliance, a farmer-owned co-operative and New Zealand’s biggest sheep meat exporter, said the deal would give it an enterprise value of $502 million.

The Country's Jamie Mackay explains further.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:01):
The Rural Report on hither do for see allan drive.
Jamie McKay, host of the Countries with us, say, Jamie
cod I hear that. Okay, talk me through what's going
on with the lions right well?

Speaker 2 (00:12):
The meat industry's worst kept secret was let out of
the bag this morning, so meat posts of the Alliance Groups.
There's Irish based company Dawn Meats is lining up to
pay two hundred and fifty million dollars for a sixty
five percent steak in the meat co op. Remember, Heather
that the Alliance Groups the only fully owned or fully
farmer owned, one hundred percent cooperative in the meat industry,

(00:35):
or certainly that I know of. Anyhow. It is based
out of Inbicargo, but it's got plants in the North
and South Island at Disney, Zealand's biggest sheep meat exporters,
Silver Fern Farms is our biggest meat processor enterprise. Or
this deal values the enterprise at five hundred and two
million dollars. Now what are they going to do with
their two hundred and fifty million dollars? Were they going

(00:57):
to use most of it? It would seem to pay back.
They're going to accelerate the capital expenditure program. Some of
it will go to farmer shareholders. Just how much will
be interesting and how it affects their share value will
be interesting as well. The board unanimously endorsed the deal.
Other suitors there were other suitors. Apparently there were three.

(01:18):
They got down to three. I think I'm reading between
the lines there. I think Silver Fern Farms might have
been close. Of course, that's the other big meat company
in this country, fifty to fifty joint venture with the Chinese,
now bought by Shanghai Mailing a decade ago. And interestingly,
Dawn Meats was understood to have been the underbidder to

(01:39):
that offer in twenty fifteen sixteen. So we need shareholder
acceptance obviously, Heather. If they don't get it, what are
the options for the Alliance Group then asset sales, site
closures we've already seen Smithfield in Timaru, and further cost
cutting initiatives. And just to give you some idea about
Dawn Meats who they are family owned Irish company founded

(02:00):
in nineteen eighty core and you'll turnover a five point
eight billion compares to one point eight billion. That's New
Zealand dollars for the Alliance Group, whose turnover has been
slipping in the past few years. So interestingly the final
point old mat makers. The Alliance Group has come in
for a fair bit of flack in recent years or

(02:23):
seasons because, as the only one hundred percent farmer ow
meat process and co op, it's been accused of uncooperative
sweetheart deals for largest suppliers and third party traders. See
if you pay if your supply Fonterra, for instance, heather
or zespery, you get the same no matter whether your
milk or kiwi fruit comes from Northland or Southland. Not

(02:46):
that we grow keywy fruit in Southland just yet, not.

Speaker 1 (02:48):
Yet, not yet. But if we carry on with this
climate change in the coal for long enough, you will
be talk to me about bn zen. Why are they
feeling so confident?

Speaker 2 (02:56):
Ah, well, they've they've led the charge the for their
forecast milk price for the twenty five to twenty sixth season,
they've lifted it seventy five cents to ten dollars twenty five,
remembering Fonterra started with a pretty a pretty bullish forecast
milk price themselves at ten dollars, albeit at their midpoint

(03:17):
wasn't exactly in the middle because their price forecast range
was from eight to eleven dollars. Now GDT, last week's
GDT will have probably buoyed the ben Z a wee
bit here. Interestingly, the futures market's called its heels a
wee bit, But this afternoon, when I last checked, the
twenty five twenty six futures market was trading at ten

(03:40):
dollars sixteen, down from ten twenty three. If we get
another ten dollars payout, hallelujah, praise the Lord, because we're
going to get one for the twenty four to twenty
five season that will be decided by Fonterra anyhow in
September or October.

Speaker 1 (03:54):
Brilliant stuff, Jamie, Thank you so much, Jamie McKay, host
of the Country.

Speaker 2 (03:58):
For more from Heather Dooplasye Allen Drive, listen live to
News Talk Set B from four pm weekdays, or follow
the podcast on iHeartRadio.