16 Sep 2015

Chinese SFF buy looks to shake-up industry

11:15 am on 16 September 2015

The move by China's Bright Foods to set up a joint venture with New Zealand's largest meat processor Silver Fern Farms looks set to give the industry its biggest shake-up in years.

Silver Fern Farms chairman Rob Hewett (right) and chief executive Dean Hamilton, at today's press conference at the company's Dunedin headquarters.

Silver Fern Farms chairman Rob Hewett (right) and chief executive Dean Hamilton, announcing the investment plans yesterday. Photo: Radio NZ / Ian Telfer

In an instant the deal has transformed Silver Ferns Farms from debt-ridden and struggling to the meat sector's cashed-up giant.

However, it has dashed the ambitions of those who had been pushing for industry rationalisation through a merger of Silver Fern and the other major meat processor, Alliance.

Bright Food subsidiary Shanghai Maling Aquarius Group will invest $261 million in Silver Fern Farms as part of a $311 million deal. It will own 50 percent of a new entity, with the other 50 percent to be owned by Silver Fern's farmers.

Keith Woodford, honorary professor of agribusiness at Lincoln University, said Alliance looked to be the loser from the new link-up, which is possibly close to its worst fear.

"This (deal) blows away the competition. Not only is Silver Fern Farms very big, but also very well financed. There is going to be some very hard questions (for Alliance). This has changed them from being in a strong position to potentially being in a difficult position."

Silver Fern has $2.3 billion in sales, making it the country's largest meat processor.

Meanwhile, Alliance is brushing off the Silver Fern Farms deal and talking up its own future as the only 100 percent New Zealand owned red meat processor.

Alliance Group chief executive David Surveyor said its next moves to improve better returns would be unveiled at roadshow meetings with farmers next month.

He said the strategy would be to look for efficiencies, improve marketing, lift volumes and prices, while cutting costs and providing resources for future investment without the risks of merger or acquisition.

Get the RNZ app

for ad-free news and current affairs