Silver Fern Farms' debt-burdened co-operative structure is no longer viable and the company needs an injection of money to survive, its chairman Eoin Garden says. "For 60 years it has been a good business model. We had a debt-funded business. That environment has changed," Garden told 30 farmers at a meeting in Christchurch yesterday reports NZX. The meeting was one of 15 planned across NZ to discuss a proposal to open SFF's farmer share register to other investors and raise up to $128 million from existing shareholders. The move would effectively end the co-operative status of the company, but farmer shareholders would retain voting and board control. New shareholders would have weaker voting rights than farmers. NZ's biggest meat co-operative wants its farmer shareholders to swap their rebate shares and supplier investment shares for new ordinary shares, which could be traded on the unregulated share exchange Unlisted. Those shareholders would then be eligible to pay cash for two more shares at a dollar a piece. In a presentation to farmers, Garden and SFF chief executive Keith Cooper said the co- operative structure was no longer the ideal model. Garden said he knew many farmers were worried about the co-operative status being threatened, but he believed shareholders were getting confused about ownership and the business. "It's not about losing control. We will lose control of the co- operative if we don't put the capital base in place." Garden said it was shareholders' responsibility to show leadership. The proposal was about financial prudence and strengthening the balance sheet. SFF has $189m of debt. "If we do not get this right, any warm fuzzy feelings about a co-operative, it's not going to be there, in my view," Garden said. Some farmer shareholders believed the company was strong enough to withstand external factors that it had no control of, but directors had a responsibility to reduce risk, Garden said. SFF relied on funding from a syndicate of five banks, but if one pulled out, SFF could not be sure the others would fill the gap, Cooper said.
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