Benefits highlighted in partnership for two major New Zealand agri-businesses

A PricewaterhouseCoopers (PwC) report has cited the merits of the proposed partnership between Silver Fern Farms Limited (Silver Fern Farms) and PGG Wrightson Limited (PGW).

 

Silver Fern Farms is a major meat processing company in New Zealand with annual revenues of NZ$1.9 billion (US$ 1.4 billion) yearly.

 

PGG Wrightson is also a New Zealand agri-service company engaged in sheep, beef and feeds production. The company achieved a NZ$34.6 million (US$25.40 million ) profit for the six months to December 31, 2007 up from NZ$20.6 million (US$15.1 million) a year earlier. Last year, high dairy prices were seen to offset weaknesses in its beef and sheep sector. 

 

The 36-page report, released on both companies' websites, is a summarised version of the larger Business Case Report that PwC presented to the boards of Silver Fern Farms and PGW prior to the announcement last month of the proposed partnership.

 

When approved, the proposal would see PGW invest in Silver Fern Farms, and the two companies working together to create an integrated supply chain within the farm gate, feeding into the existing red meat supply chain and thereby fulfilling the 'plate to pasture' vision.

 

The Summary Report includes discussion of the proposed business structure, the operating model and the estimated costs and benefits associated with the partnership.

 

The company initially announced the proposal on June 30.

 

The next step will be the publication of an Explanatory Memorandum for SFF suppliers next month.

 

The companies hoped the release of the report would ensure that the SFF suppliers have all the information they need to make a crucial decision.

 

The Summary Report also lays out the mechanism under which other processors could join the partnership, including detail on how PGW's shareholding and right to appoint directors would reduce.

 

The report highlighted improved supply chain and processing efficiencies that would result from the partnership as well as other costs reduction.

 

PwC concludes that the expected annual benefits of the partnership are US$59 million in the short term and US$111 million in the long term. This does not include unquantifiable benefits such as anticipated gains from a more efficient procurement model and the participation of other companies.