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Allan Barber asseses what's at stake for Silver Fern Farms over the Shrimpton/Gallagher 'requisition'

Rural News
Allan Barber asseses what's at stake for Silver Fern Farms over the Shrimpton/Gallagher 'requisition'

By Allan Barber*

The media release from Silver Fern Farms about the requisition for a special meeting to consider the resolution to form a partnership with Shanghai Maling reeks of the company’s frustration at what it sees as a complete waste of time. However, regardless of that frustration, the company has agreed to the requisition and will set a date for the meeting.

A group of 80 shareholders, led by John Shrimpton and Blair Gallagher, has passed the required 5% threshold to requisition the board to hold a special meeting in compliance with the Companies Act. Shrimpton cancelled a meeting with the board which he had arranged for 2nd May and which the board was keen to hold, so its members could learn and understand the purpose and legal justification of the requisition.

Not surprisingly the board sets out a list of very cogent reasons why it considers the requisition a waste of management time and resources, notably 67% of shareholders have already voted with 85% in favour of the deal, SFF would be in breach of contract if it pulled out and there would be no legal obligation on the company as a result of the special meeting.

A possible weak spot in the company’s position may be its own constitution which appears to requires a minimum of 75% of shares holding voting rights to vote on a special resolution to enter a ‘major transaction’. Knowing the normal level of shareholder participation, it would be difficult if not downright impossible to achieve such a high threshold.

The media release also states the merits of the partnership have, if anything, increased since the vote in favour last year. This indicates the fickle nature of meat industry profitability, raised by SFF chairman Rob Hewett last month, when he said this year’s result would be materially worse than last year.

Winston Peters has put out a press release accusing the SFF board of a cavalier attitude and demanding responsible Ministers instruct the OIO to place its approval process for the Shanghai Maling investment on hold. But the release also states it is a spectacular back down and questions why the company has blinked, if it is so sure of its position. Peters calls it a shareholder revolt which is a bit of an exaggeration when the group only represents 6.5% of the shareholder base.

I confess I have already asked the company if it could explain why it has agreed to the requisition when it obviously considers it a waste of time and received the answer it was a requirement of the Companies Act. Without in depth knowledge of the legal niceties, it is hard to understand why the Companies Act would enforce the requisition to hold a special meeting, if the company is not also bound by the result of a vote. This is where it hinges on the specific dictates of the company’s constitution.

A logical assessment of the shareholder group’s rearguard action suggests the small minority that is trying to overturn the partnership deal is highly unlikely to succeed, given the massive majority in favour at the time of the original vote. Therefore this action will be no more than an irritant in the process.

SFF must make sure it has all its legal ducks lined up and, assuming that is the case, it will be able to get on with life. Anything else would be a disaster from a number of perspectives: it would seriously jeopardise the company’s future financial health and would almost certainly cause a major stress point in New Zealand’s relationship with China.

It’s a pity Shrimpton has refused to meet the board, because communication is always preferable to incurring legal costs. Obviously he and the other 79 shareholders feel disenfranchised by the fact the vast majority of votes were in favour of the Shanghai Maling partnership deal, but in a democracy I was under the impression majority ruled. Winston Peters has spent his political career supporting, with considerable success, minority positions and this one ties in neatly with his antipathy towards foreign investment in New Zealand.

While this particular issue looks as though it is a foregone conclusion, there may yet be some twists and turns to negotiate.


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*Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country. He is chairman of the Warkworth A&P Show Committee. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ».

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10 Comments

Price of goverance more like it.
These things do matter.
If is so look out PI. Not Thomas.

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Of course Goldman Sachs always structures deals with the benifit of small shareholders at forefront of their thinking.

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Seriously, this has always looked like a shonky deal. How could it not be considered a ' significant transaction '? Goldman Sachs have worked some dodgy magic and the board have hoodwinked their gullible shareholders under pressure from their foreign bankers. What could possibly go wrong?

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While the legally binding threshold of a transfer of 50% of assets for a significant transaction may not have been breached, the moral threshold of passing the ultimate decision making power of a casting vote to another party must be considered as significant. This has the same effect as a transfer of more than 50% of assets. Could be along and expensive legal argument for SFF. Where have we seen this before ??

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Indeed red tussock a company with a long history of shambic corporate deals. The thing that stinks for me is the inaccuracy of the prospectus in relation to the actual financial position. How could shareholders have made a considered decision under threat of receivership based on false information? They were shafted and hopefully the regulatory authorities take some action.

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One does find interesting that Vietnam own and Shrimpton controlled Glenthorne Station Limited has not filed financial statements with the companies office ever.
One much practice good governance, when one lectures it...
Phone call from the OIO coming no doubt

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It obviously was a major transaction,and Winston being a cunning old polition,and having a good nose for legal matters,makes me think theres more to come with this saga,and would have to query sff legal advice to date.

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Congratulations to Mr Gallagher and Mr Shrimpton.
This was a stunningly good deal for Shanghai Maling and a bad one for the existing shareholders.
It's noticeable that the accounts and the interpretations of them vary wild. SFF may have been in actually a very good position prior to the deal, but the promoters were not going to let that be known.
And you have to be very careful about the directors and how they make decisions. There have in New Zealand many tales of brown paper bags of cash handed around when such sellout deals have been made.

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Maybe the biggest transaction in history of nz meat industry,cant think of any bigger of hand,hard to argue not significant.

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