Silver Fern Farms plan to enter a 50/50 partnership with Chinese company Shanghai Maling – part of the Bright Food Group which also has a major shareholding in the New Zealand dairy company Synlait.

Rob Hewett, Chairman of Silver Fern Farms, says the partnership is subject to approval by 50 per cent of the co-operative's shareholders and he and the executive team will hold a series of farmer meetings around the country in coming weeks to explain the deal.

Photo: File.

'Under the proposed deal, Shanghai Maling will invest $261 million in cash for half of Silver Fern Farms' business,” explains Rob.

'The investment will be into a company, to be named Silver Fern Farms, which will own all of the assets of the business, and be owned 50 per cent by the existing Silver Fern Farms Co-operative and 50 per cent by Shanghai Maling.

'In addition, the board of the co-operative plans to redeem the 5.5m supplier investment shares it has outstanding and pay a $35m (30cps) special dividend to ordinary and rebate shareholders at the time of the transaction.

'This dividend will be a welcome return and one which will set expectations moving forward.

'Existing ordinary and rebate shareholders will retain their current shares in the co-operative and supplier shareholders will continue to supply their livestock through the co-operative.”

By Shanghai Maling investing $261 million of cash into the business, the co-operative will own 50 per cent of a business whose equity value has effectively doubled in size.

'The implied value of the transaction of $2.84 per ordinary share compares to a share price of 35 cents when the trading of shares was suspended in July,” adds Rob.

The Shanghai Maling offer was superior to a last-minute proposal put to the board in recent days.

Rob says the proposal has been enthusiastically received by Silver Fern staff, who gave

chief executive Dean Hamilton a standing ovation when he announced the deal earlier today.

'This partnership will give job security to our staff and be a moral boost,” he says. 'It will create more job opportunities here in New Zealand and in the markets.”

The company currently has 7000 staff, 19 plants and 6000 shareholders.

The intention going forward, subject to board approval at the time, is for Silver Fern Farms to return 50 per cent of profits every year to its two shareholders.

'The board considered many options for new capital, both locally and internationally, but Shanghai Maling stood out for the enormous opportunities and ongoing benefits for the co-operative, its shareholders and supplying farmers,” adds Rob.

'We are very excited by this partnership proposal with Shanghai Maling and believe they are the best partner for Silver Fern Farms. Our values are closely aligned.

'The proposed deal has many long-term benefits for the co-operative, including full support for our global ‘Plate to Pasture' strategy, and the means to accelerate the strategy in a number of key markets as a result of the investment of substantial new capital.

'This new partnership will see Silver Fern Farms in a cash-positive position at year's end.

'That will allow us to both reinvest more aggressively in executing our strategy, but also to share profits via regular payments of dividends to the two shareholders and maintain competitive procurement prices for our livestock suppliers.

'The co-operative will receive 50 per cent of those future dividends and intends, subject to co-operative board approval at the time, to in turn provide regular payments of dividends and rebates to shareholders.”