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Bright Foods unit to buy 50% of Silver Fern, inject $261M

Bright Foods unit to acquire 50% of Silver Fern Farms, invest $261 mln

Sept. 15 (BusinessDesk) - Shanghai Maling Aquarius, a listed subsidiary of Chinese state-owned Bright Foods, will acquire 50 percent of Silver Fern Farms in a deal that will see it inject $261 million into New Zealand’s biggest meat exporter,

Silver Fern's existing farmer-shareholders, some of whom object to a loss of control of the meat company to offshore interests, will be paid 30 cents a share as a special dividend as part of the deal, the company said. The deal is subject to both approval from shareholders and the Overseas Investment Commission. The deal was worth a total of $311 million, the company said.

Silver Fern chairman Rob Hewett said the deal had been "the worst kept secret in the red meat sector." The company has been seeking a $100 million capital injection to strengthen its balance sheet before bank debt falls due next month and help its international expansion. It hired Goldman Sachs to look at its options and suspended trading of its shares on the Unlisted platform in July.

The meat industry has been struggling for years with overcapacity and competition for stock as sheep numbers fall.

Shareholder groups in Silver Fern Farms and its neighbouring Alliance Group have called for both companies to consider merging in favour of taking in foreign investment, but Alliance management rejected the idea.

Silver Fern Farms shareholder Allan Richardson has said there will be long-term repercussions to foreign ownership in New Zealand’s red meat industry, including Silver Fern Farms getting the capital to pick off suppliers from other processors.

Wanaka-based businessman John Rodwell confirmed local agribusiness companies had clubbed together with an offer to underwrite a rights issue to existing shareholders instead of foreign investment but the company's bankers were understood to have deemed the $40 million-to-$50 million offer as insufficient. The group had since boosted its underwrite ability "substantially" but had been unable to communicate with Silver Fern Farms because it had signed agreement not to talk to other parties.

The Dunedin-based company last month told shareholders it was on track for 2015 full-year earnings before interest, tax, depreciation and amortisation in the range of $75 million to $85 million. Debt would be in a range of $140 million to $170 million compared to $289 million last year, it said.

The company’s value-add strategy has been gaining momentum and it has been selling branded products into China through Alibaba’s Tmall electronic shopping mall. The company has a target of 10 percent of overall revenue from value-added goods by 2017, compared to 4 percent in 2014.

Bright Foods, which has a 51 percent stake in South Island milk processor Synlait through another subsidiary Bright Dairy & Food, has been on a buying spree in recent years. It is China’s second-largest food manufacturing company, headquartered in Shanghai. Recent acquisitions include a 60 percent stake in UK cereal maker Weetabix which it is said to be looking to IPO, a 75 percent stake in Australia-based food processor Manassen Foods which it is also looking to list, and a majority stake in Italian olive oil make Salov Group.

Its subsidiary Shanghai Maling, which is listed on China’s A-share market, suspended trading in its shares on Aug. 25.

The firm, which is largely involved in slaughtering and canned foods, has been focused on global expansion, particularly in countries that export large amounts of beef such as Australia and New Zealand.


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