Questions asked of Silver Fern Farms suitor

Research released by New Zealand First has questioned the viability of the proposed merger of Dunedin based Silver Fern Farms (SFF) and the “indebted” Chinese company Shanghai Maling.

The merger comprises of a NZ$261m cash investment on behalf of Shanghai Maling in return for a 50 percent share in SFF. The capital injection was seen to provide promise for alleviating SFF’s debt burden, dispelling uncertainty in the industry and the potential to facilitate expansion into the growing Chinese market for premium meat. SFF shareholders approved the deal in October 2015 with 82.2 percent voting in favour on a 67 percent turnout. 

In light of the New Zealand First research, the Rt Hon Winston Peters said in a Scoop Press Release, “Shanghai Maling has been talked up as a massive company and a game changing investment for Silver Fern Farms, but the reality is that it is not.”

The New Zealand First findings place the total debt of Shanghai Maling at NZ$353m compared to the NZ$121m held by SFF. New Zealand First also claim that further financial analysis revealed that Shanghai Maling underperformed in “most key financial areas.” 

Mr Peters claims that the weakened financial status of Shanghai Maling raises serious doubts over the investment, considering the deal “hands them all the levers of economic control including the chair’s casting vote.”

The findings are the latest in a string of controversies surrounding the merger. On April 18, New Zealand First lodged complaints with the Financial Markets Authority and the Companies Registry Enforcement Team. The complaints address alleged misleading financial information circulated to shareholders in a document in September and the failure of the decision to be classified as a “major transaction” under the Companies Act 1993. Under the Act, a major transaction requires a higher threshold of voter approval than what was achieved in October last year. 

A group of 80 shareholders requisitioned the SFF Board for a Special Annual General Meeting to consider a “special resolution” of shareholders requiring 75 percent of total shareholder approval. 

Rob Hewett, Chairman of SFF, in an interview with The Country noted that the Board was legally required to schedule the AGM under the Companies Act, though the resolution reached would be a “waste of time and resources” with no legal effect. Hewett stressed that SFF were legally bound to continue with the transaction and that it remained in the “best interests of the company.” 

The Official Investment Office is currently considering the investment and a decision is expected before June.

This article first appeared in Issue 11, 2016.
Posted 11:01am Sunday 15th May 2016 by Sally Wilkins.