Alliance Group CEO Owen Poole says the company was not looking at merging with Silver Fern Farms because there was no proposal to do so.
He said that it was business as usual for Alliance in spite of speculation that a plan by PGG-Wrightson to invest $220 million in SFF would draw Alliance into merger talks.
“We are working on our own strategy and we are going to talk to our shareholders about our own plans,” he said in an interview last week. Mr Poole said the PGG-W and SFF merger was the business of those companies.
“As far as Alliance is concerned, they’ve got to deal with their own shareholders.”
He had some reservations about the merger and the loss of farmer control, governance issues from having a corporate investor, the hybrid ownership model and outsourcing stock procurement.
All very valid concerns.
Alliance experienced the hybrid ownership model when Freesia Meat Holdings was an investor, and Mr Poole said it was difficult reconciling conflicting demands.
“It was a good day for us both when the arrangement ended.”
Mr Poole said procurement was “a central pillar to vertical integration,” which he felt should not be outsourced to a third party.
If PGW is contracted to procure for SFF, what do their stock agents do when other companies offer better prices?
Alliance already operated an integrated model. In 1997, it launched Securing the Future, which introduced a genetics and breeding scheme to farmers to show the type of animals wanted by the market, based on consumer research.
It has also addressed capacity issues and recently introduced Via Scan technology, which objectively measured lamb carcasses and provided the information to farmers.
“This is not new. We’re extremely well advanced in all of this,” he said of changes proposed by SFF.
If Alliance is implementing the right strategy under its own steam, I’m yet to be convinced SFF needs PGW as a partner to do the same thing.