PRESS RELEASE
INDEPENDENT REPORT SEES CONSIDERABLE SHAREHOLDER BENEFITS
Silver Fern Farms today said that an Independent Adviser''s Report to assess
the merits of the proposed partnership with PGG Wrightson Limited (PGW) has
identified that the proposal has a number of significant positive benefits
for shareholders of Silver Fern Farms.
The full report will be posted to shareholders later this week with notice of
the special meeting to be held in Dunedin on 8 September 2008. A copy of the
full report is also available on Silver Fern Farms'' website -
www.silverfernfarms.co.nz.
The author of the report is Grant Samuel & Associates Limited (Grant Samuel),
the leading practitioners in the New Zealand market in the independent
evaluation of transactions.
The proposed transaction would increase the equity ratio of Silver Fern Farms
to 80 percent on commencement, making it the "financially strongest company
in the New Zealand meat processing industry," said Grant Samuel. Post
transaction, Silver Fern Farms would have a very robust financial structure
enabling it to develop a stronger in-market presence and invest in capital
projects. (pg 13)
Grant Samuel valued a 50 percent shareholding in Silver Fern Farms between
$205 million and $225 million. This puts the $220 million price being paid by
PGW at the top end of the range.
In considering PGW as a strategic partner, Grant Samuel concluded that PGW''s
resources and national coverage means it is uniquely positioned to deliver
increased stock, and to assist farmers to participate in the integrated
supply chain. The report also noted the belief by Silver Fern Farms that "no
other company in New Zealand can match the skills, knowledge and nationwide
coverage of PGW." (pg 18)
In examining the merits of the integrated supply chain, Grant Samuel noted
shortcomings of the current model and stated:
"The involvement of PGW will accelerate the change needed at both the
producer and in-market ends of the supply chain."
In examining the impact of control of the proposal on Silver Fern Farms,
Grant Samuel stated:
"Existing shareholders are not being disadvantaged by PGW acquiring a 50
percent shareholding." (pg 12)
"In normal circumstances a 50 percent shareholding would give control to that
shareholder. The Proposed Transaction ensures significant influence remains
with Silver Fern Farms existing shareholders." (pg 4)
"The loss of outright control is not material in Grant Samuel''s opinion...
ceding some control to PGW is a small trade off to pay for the benefits the
Proposed Transaction is seeking to deliver to suppliers, Silver Fern Farms
and PGW." (pg 15)
Silver Fern Farms welcomes the input of the directors nominated by PGW and is
looking forward to having those directors actively contribute to the
discussion of strategic issues at Board level. Grant Samuel states:
"On balance, having a committed partner to assist with a complex transaction
that has the potential to bring significant benefits to both parties should
be viewed positively by existing shareholders." (pg 12)
Grant Samuel did not believe Suppliers would be disadvantaged by PGW''s
involvement in the procurement function. Market forces would ensure that
farmers got a fair price for stock supplied. In addition, the price paid to
suppliers for stock would be set by Silver Fern Farms and not PGW. Farmers
would be entitled to receive 50 percent of the profit available for
distribution by way of rebate which would be substantially higher under the
proposed transaction than under the status quo. (pg 15)
Grant Samuel considered that the issue and redemption of shares at AEV a
fairer approach than the existing $1-in-$1-out system, but this would not be
feasible under the existing capital structure. (pg 4)
Eoin Garden, Chairman of Silver Fern Farms, said that he hoped shareholders
would take time to carefully read the report and the accompanying Shareholder
Information Pack. "Both documents are rich with information and designed to
help our shareholders come to the right decision. We believe the Grant Samuel
report, as an unbiased and independent assessment of the merits of the
partnership, represents a compelling endorsement of our proposal."
SILVER FERN FARMS FINANCIAL UPDATE
Silver Fern Farms is projecting a net profit after tax of not less than $40m
for the full financial year ending 31 August 2008. The results, which relate
only to the stand alone Silver Fern Farms business prior to any consideration
of the partnership arrangement with PGW, are attributed to improved market
conditions, currency depreciation, increased throughputs and improved
operating efficiencies including cost containment measures related to plant
operating costs.
Keith Cooper, Chief Executive of Silver Fern Farms, said the performance
factored in expected non-recurring expenses related to the company''s
rightsizing programme of $40m. "The benefit of the repositioning strategy is
that we are now well placed as we move into an environment of projected lower
livestock numbers."
The company''s focus on operational excellence, strategic initiatives and best
practice had also served to reduce debt by a further $80m to $105m for the
financial year.
Mr Cooper said the 2009 year was expected to be more ''normalised'' following
the poor 2007 and strong 2008 years as a result of lower procurement volumes
and continued firm international market prices.
Ends
Keith Cooper Brent Melville
Chief Executive Group Communications
64 21 442 190 64 3 474 6595
64 27 444 1322
End CA:00168839 For:SFF Type:JOINTV Time:2008-08-20:09:01:10