Spotlight again on SFM

Press, 2 September 1983, Page 8

Spotlight again on SFM

BY

ADRIAN BROKKING,

commercial editor

Meat shares came back in the limelight on the New Zealand Stockmarket yesterday, after two companies, Fletcher Challenge, Ltd, and the Primary Producers Co-operative Society each received permission to acquire up to 100 per cent of the capital of Southland Frozen Meat, Ltd. Yesterday almost 150,000 SFM shares changed hands; the bulk — 147,922 shares — at 400 c, but later in the day a parcel of 500 shares was crossed at 405 c, and 1200 shares at 410 c, a rise of 20c on the day. Although Fletchers has

permission to acquire the whole of SFM, it is thought that it will negotiate on the size of holding comfortable to the SFM directors, at least initially. Needless to say, the news was not exactly welcomed at Waitaki; this company is expected to hear on Tuesday that it may proceed to buy up to 35 per cent of SFM. Meanwhile it is left out in the cold. The Examiner of Commercial Practices, Mr P. E. Donovan, has obviously chosen to let the battle for SFM take be fought in marketplace but it is understood that he has put conditions on both applications approved so far.

These conditions relate to the public interest, which in this case is the farmer. Chief among the conditions is that he wants assurances that all farmers will be treated fairly for space at

SFM works at Mataura and Makarewa.

Yesterday’s news came as a surprise, because the PPCS application to the Examiner, made 25 working days ago last Tuesday, was a closely-kept secret. Negotiations on behalf of Fletcher Challenge have been handled by Mr lan Donald, chairman of Wrightson-NMA, FCL’s marketing wing, but he could not be contacted for comment yesterday. SFM officials would not comment. The board of SFM had officially backed the FCL application, to proceed to 51 per cent in certain circumstances. The chairman of PPCS, Mr A. Burnside, said from his home near Balclutha that PPCS had made its application early in the piece but the first one had not been accepted. It had been relodged with the information the Examiner required.

It was PPCS which started the speculation on SFM’s future when on June 30 it began buying SFM shares at 305 c. That action caused the SFM directors to seek talks with WaitakiNZR, Ltd; the two companies formed plans for an umbrella company. This in turn drew a reaction from FCL, which already owned 19.97 per cent of SFM’s shares, a shareholding largely acquired through a share swap with PPCS in 1981 which allowed PPCS to gain a majority sharehold-

ing in Canterbury Frozen Meat, Ltd. It approached SFM, and the SFM board decided to accept the FCL proposal to take up 24.9 per cent of SFM’s shares, with a right to go to 51 per cent. Now it was the turn of Waitaki-NZR to apply to the Examiner to increase its shareholding which stands at 24.9 per cent, to 35 per cent.

In its initial bidding, PPCS bought 8. per cent of SFM’s shareholding, but late in July, sold its shares for $4 each to Waitaki-NZR.

Mr Burnside said that PPCS now held few shares in SFM. Asked if that meant that the society would go into the market, Mr Burnside said he doubted it would.

“We’ve no spectacular plans. We’ll sit and watch,” he said.

To go into the market immediately would undoubtedly be costly, he said. Permission to buy 100 per cent of SFM’s shareholding lasts a year, and it could be extended. It was also unclear what FCL proposed, Mr Burnside said.

FCL could rush in and buy, but there was also a question of whether FCL wanted to become involved in the meat industry.

Different executives in FCL seemed to have differing views on that, he said.