IN DIFFICULTIES

Evening Post, Volume CVI, Issue 81, 3 October 1923, Page 9

IN DIFFICULTIES

POVERTY BAY FARMERS'

MEAT COMPANY

SUGGESTED SALE TO VESTEYS

SUPPORTED BY NATIONAL BANK

OPPOSITION BY SHAREHOLDERS.

(»I TELEGRAPH.— SPECIAL TO THE POST.)

GISBORNE, 2nd October.

An^ extraordinary general meeting of the i-oVerty Bay Partners' Meat Co., Ltd.,.called for the purpose of discussing an offer to purchase the company's works at Waipoao was largely attended this afternoon. Mr. W. D. Lysnar, M.P., chairman of directors, presided. The chairman read a statement drawn up by the directors, in which it was stated: "In the first place the directors desire to say that the general'manager of this company's bank has very fairly arid frankly admitted to three of your directors that he is only forcing the position now because of the immediate prospect of selling out to Vestey Bros., ■which he considers is in the best interest of the bank and guarantors, and your directors, while not agreeing with his conclusions, fully appreciate the same, and recognise that he is actuated by the very best intentions. It is only fair to say that in the past the bank has acted in a fair and reasonable way towards the company,, and your directors have no complaint to make against the bank in this respect." ' . ' The statement added that the question of selling to Vestey's first arose in February last. When the chairman was approached he indicated that unless the buyers were prepared to negotiate upon the following terms, he did not think there was any possibility of doing any business:—

1. The buyers must be prepared to purchase the company's ship in conjunction with the works. 2. The shareholders of the company must have an absolute right to put their stock in the, works on their own account, and to be charged a rate not more than the average of the other freezing -works in the North Island, and,

3. The sale would have to be first approved by the 6hareholders, as well as by the Government, and the Meat Producers' Board.

It subsequently transpired that the inquiries were being made for Vestey Bros., and though some interviews took place between some of your directors and Mr. Rowlands, Dominion manager of Vestey Bros., when the above basis was again distinctly emphasised, it was found quite impossible to do any business with them, and the negotiations for the sale were broken off. A counterproposal was made, that Vestey's should Bell their local works, and on the matter being referred to London, a reply came that they were not sellers. Three days later, on the 6th ultimo, a copy of the following telegram was received from the manager'of the National Bank of New Zealand:—"Have received word from Rowlands thai-offer made to-day for Poverty Bay Farmers' Meat Company, undertaking exclusive of Admiral Codrington. Inform W. D. Lysnar and other directors that in my,; opinion immediate sale is the only way. to stop farther loss to both the guarantors and the bank, and unless accepted by directors immediately, the bank will take steps for compulsory liquidation. Reply by telegram earliest date directors can meet to consider offer."

T.ater on, on the same date, a definite offer was received on behalf of Vestey Bros., offering £225,000 for the works, etc., but riot including the ship; this offer to remain open for seven days. Terms, £150,000 to be paid in cash, balance to be arranged. A meeting of directors was called,-when it was decided that three of the directors should immediately proceed to Wellington, and interview the general manager of the bank, and point out the serious results if the sale was carried through, and that if the bank would give time steps would be taken to place more shares. The bank declined^ to entertain this until it was known if the authorities would sanction the transfer of the license. A further meeting of directors was held on the 14th ultimo, when the. following resolution was passed:—

WOULD RUIN THE COMPANY.

"That in the opinion of the directors of this company it regrets it cannot accede to the request of the National Bank of New. Zealand to accept the offer of Nelson Brothers, Ltd., on behalf of Vestey Bros., to purchase this company's works, as the proposed consideration is totally inadequate, and will cause ruin to the company, and, apart from this fact, upon the following grounds:—

1. That it is against the interests of shareholders and detrimental to the public interest that such a powerful combination with a recently-increased capital to £8,750,000 sterling should be allowed to squeeze out a legitimate farmers' co-operative company, and thus defeat the very object for which the farmers have made big sacrifices to establish these large and efficient .works. 2. In view of the bank's intimation that if the directors do not accept this offer, the bank will force the company into liquidation and sell the works to Vestey Bros., immediate steps should be taken to request the Minister of Agriculture to give an intimation that if this purchase is effected as suggested, he will exercise his power to refuse to cancel the license to Vestey Bros., or their representative company in connection with the works, in accordance with the powers vested iv him by law. 3. That, if necessary the New Zealand Meat Producers' Board be requested to give effect to their official statement made on Ist May last, to the executive of the New Zealand Farmers' Union, viz., that it is not in the best interests of the meat producers of the Dominion that purchase of the freezing works by overseas meat interests should be made, or that oversea concerns should acquire any further interest in New Zealand freezing works, or that new works should be erected by any other than New Zealand interests.

"The board now decided that in the event of such purchase or purchases, or erection of freezing works by oversea interests without the approval of the board, it will take such action as will prevent Buch interests controlling the meat going through such freezing works." ■• This resolution was embodied in a letter dated _14th September and sent to the Hon. W. Nosworthy, Minister of Agriculture, and the chairman at once proceeded to Wellington to interview him. On the 26th the latter informed the chairman that the matter had been considered, and that he was prepared to consent to the transfer to Vestcy Bros. On the 27th ultimo an application was handed to the Meat Producers Board in Wellington asking it to go into this question and fix a time to hear the

company in the matter. So far no defirite appointment or reply has been received from the board.

NOT A FAIR VALUE.

In the opinion of the directors, the suggested consideration of £225,000 is totally inadequate and not a fair value. In September, 1021, the directors had a valuation made by two freezing works engineering experts, Messrs. James and M'Carthy, of Wellington, which showed that the land, plant, and buildings were worth £401,802. . This valuation has since been co.-firmed as being the value at the present date. The preliminary balance sheet, for the last season has since been made up to the annual balance date of 30th August, 1923, and it shows that thfcre is a working profit on the works amounting to £3822 6s 4d. There are losses totalling £5986 on previous years' operations to go against this profit. In ell preceding years, with the exception of 1922, the works made a substantial profit. The directors report that during this year the indebtedness to the bank, has Van substantially reduced. On 13th February last the amount actually due to the bank was £3b0.388 ISs 3d. wblle en 30th August of this year, the date ol oar annual balance, this indebtedness had been reduced to £203,326. There was due to the bank to-day, after allowing for the half-year's interest on 30th September, the sum of £299,768 ICB. The directors, of course, fully recognise that it will be impossible to. collect the whole of the call money due, and even some of the bills that are held may not be fuily paid, but consider that with the further call money that should bo collected within a short time it would be safe to say that the account could be brought down to a working basis of about £290,000, which would be a reduction of £60,000 from what it stood at in February last.

THE ADMIRAL COERINGTON.

Regarding the earning of the steamer Admiral Codrington from the date of the purchase until she left Falmouth on 16th January, 1923, on her last voyage, where she has been tied up for about seven months waiting for the last sseason's freight to be available, it shows a loss of £5958 14s 2d. Since then she has earned another freight, and, according to the figures that will be. shown in the balance-sheet, there will be a credit, but, as against this, there will be disbursements made at Home that will absorb the whole. Considering the disadvantages the boat haß laboured under and the loss of time in insulating her, tfs well as .the loss of time through the several accidents that have happened, and that only one trip a year has been done with her, when Bhe could have done two trips a year, and the fact that there has been no back-loading, under all these circumstances it might fairly he claimed that the result shows that if, btck-loading could be obtained and two tups a year run the working of the boat would show a substantial profit; but it is the intention of the directors to dispose of the' Admiral Codrington on the first favourable opportunity.. At present there is a ir.ortgago on her to the extent of £60,000, which is arranged for in England, and has rothing to do with the bank.

The directors had received a letter from a large meat buyer, who put through the local works last year equivalent to about SO,COO sheep and lambs, in ; which he state? that if Vestey Bros! purchased these works it will entirely eliminate their competition at Gisborne, as they will cease to operate here; which would be very detrimental to the producers.' Also, a local buyer, on behalf of an outside operator, states that he has definite instructions that if Vestey Bros, buy these.works he is not to put (any stock through them, and it will be readily seen that with the attitude taken up by the' buyers in this district it would seriously reduce competition and be a very serious thing for the farmers should the sale be carried through at the price offered. WHAT IT WOULD MEAN TO SHAREHOLDERS. The statement concludes: It would mean that the shaieholders would lose all their capital and leave a balance of iibout £80,000, for. which the guarantors would be liable; but, should the sale not be carried out, seeing that during 1921-22 the directors completed improvements amounting to £45,065 in order to bring the works up' to the highest possible standard, the necessity for any further expenditure for many years to come is obviated, and Ihe whole earnings of the work could go in reduction of its liabilities, and with the substantial support assured for the coming season, the directors are satisfied that they can still further substantially reduce the amount of the company's indebtedness to the bank if they will give them time, thus avoiding any loss to the shareholders or to the guarantors. The chairman read the clauses of the 1918 Act, which empowered the Minister of Agriculture to refuse to revoke the license of nny works which was being operated in a way detrimental to the general interest of the community. It was contended that if the sale to Vesteys eliminated competition it. would be so detrimental. '

ENDORSING DIRECTORS' ACTION,

Air. H. J. Cameron moved, and Mr. J. B. Kc-lls seconded, the following motion :— .'■.-.

That this meeting of shareholders expresses its entire approval of the course adopted by the v directors in refusing to sanction the sale of the works to Vestey Bros., and it endorses the resolntion ol 'he directors, for, in the opinion of the shareholders, it would be a calamity and contrary to the spirit and intention of tile legislation and the pledges of the Government if a sale were sanctioned to such a .huge combination, as it, will unquestionably give Vestey Btos. an undue advantage as against other buyers of stock, and so stifle competition to the detriment of trade generally. c The meeting further suggests that a respectful request be again made to the bank not, to force the suggested sale, and -nhile fully recognising that the bank has acted very fairly and reasonably in the past, the meeting desire 3to assure the bank that the_ individual shareholders will do their very utmost to support the company with their stock and any extra shares the bank may consider necessary to fully protect its position, providing tm:e is: given, or, alternatively, to agree to a definite levy ajrain'st stock. b >

That if the bank still refuses to give time, then a further appeal should be made both to the Government and to tho Meat . Producers 1 Board to stop the sale; and failing this being successful, then this meeting pledges itself to take every legitimate step possible to prevent Vestey Jiros. or any other overseas interest from continuing to work or acquire any freezing works in New Zealand.

Mr. J. B. Kells said that he had been a pretty severe critic of the directors m the past, but he believed that at this time they should stand together It would be a very terrible thing if Vestey s gained control of the works.

Mr. F. S. Bowon, whose rising -was the signal for a demonstration, moved as an amendment:—

That the chairman of directors be asked to resign, and that a committee of five shareholder* be appointed

to meet the bank and to make arrangements for the reconstruction of the works.

The rough and ready statements of the chairman, he said, covering a loss of about £400,000, were too well known for them to accept such a resolution as that proposed. Mr. C. G. Holdsworth seconded the amendment.

The chairman said he regretted that neither the mover nor the seconder was qualified to vote, and therefore were not eligible to put forward the resolution.

AN UNFORTUNATE SPIN.

Mr. G. Witters said that the bank would prefer the sympathy of the shareholders rather than Vestey's cash. The cause of the present position was an experience which .did not occur more than once a lifetime. The directors were out to save the works by hook or by crook. The company had been offered £225,000 for works worth £400,000; that was the replacement, value to-day. The ship was the cause of ; the trouble to-day. She had had an unfortunate spin, but she was worthy of better results if they did not make a big effort. Mr. Witters said it would be a terrible thing for the district. The position was one approaching slow strangulation, but they would try to shake it off. The directors had alternative proposals to make. One was increasing the capital of the company, and the other was a levy on their sheep. Mr. E. R. Black said the idea was that all shareholders should agree to a levy on all surplus stock sent off their properties, the levies going into a fund which represented a subscription list to relieve the guarantors of their liability. If they agreed to a levy of 6d per head on all surplus stock they would find a fund of £5000 per year. They could not look for dividends for many years. Their first duty was to keep Vestey's from gaining control of the works.

Mr. Henry Williams repeated an offer to take up £5000 worth of new shares if it would enable the company to carry on. (Applause.) Mr. J. C. Field said it -was essential that the co-operative works should be carried on. Destroy co-operation and the welfare of the district would also be destroyed. The bank wanted to do the Best thing, but to get £33,000 of uncalled capital and p.n.'s at trfis critical period in a few weeks was a very big thing. He advised the shareholders to get busy, and he assured them that the directors would willingly consider any suggestions.

INTIMATION FROM THE BANK,

Mr. Charles Matthews said that he had that day seen the National Bank manager, who gave him an intimation to convey to the shareholders. The general manager of the bank had wired that the Meat Board had approved the transfer of the license, and that Vestey's held an assurance that the Government would not object *5 the transfer. The manager was quite satisfied that Mr. Lysnar's efforts to block the transfer would prove futile, while they might react upon the company's interests. It meant that if the sale was forced the company would be put into liquidation, and the- Bank of Scotland would be forced to take action as regards the steamer. If the directors and shareholders would agree to the sale the transaction could be effected without putting the company into liquidation. Mr. Matthews considered' the levy scheme quite a good one, and quite possibly acceptable to the National Bank, with the result that the position would be saved. He believed that the retirement of the directors would be in the interest of everybody, and he.was quite prepared to resign. ■' :• ' Mr. Lysnar expressed accord with the other .'directors in their willingness' to resign to give the shareholders a free hand. He had only done his duty; and if he had studied his own interests he would have resigned long ago. When the gathering was held on the arrival of the ship was \ there a shareholder who said anything about that ship? Those were- the things that the shareholders seemed to forget. A voice: "I'll never forget that banquet."

Mr. Lysnar added that there was a good thing in shipping, but it had to be taken up on a bigger scale. The meeting to-day was for the purpose of considering the position with regard to Vestey's offer only, and other matters could not be decided at this meeting. The ■ directors' position would have to be considered, and an opportunity would be given at a meeting to be called. The motion was then put to the meeting and carried, only two voices being raised against it.