SOUTH OTAGO FREEZING WORKS.

Otago Witness, Issue 3912, 5 March 1929, Page 20

SOUTH OTAGO FREEZING WORKS.

SALE BY DIRECTORS. BALCLUTHA, February 28

A meeting of shareholders in the South Otago Freezing Company, Ltd., convened by Mr John Christie (a member of the board of directors) to discuss the proposed sale of the works to the New Zealand Refrigeratng Company, was held in the County Chambers this afternoon, and was very largely attended. About 100 representative men from various districts were present, and there was also a sprinkling of townspeople, representing the "dry” element in the share list. ■-*

Mr Christie presided, and in a lengthy address enlarged on the benefits that the works had conferred on the district generally, and the sheep farmers in particular. Last season the works, under new management, had done fairly well, and this season, thanks to a buying arrangement with the Co-operative Wholesale Society of Englands K?e likely to do even

better. In fact, he believed that if the works were allowed to continue as at present it would not be long before they were in a position to send out lorries to bring in the lambs. The C.W.S. was prepared to take the stuff over at the price it cost the freezing company. The company was also purchasing “ on the hoof ” for.this huge English co-operative concern, which operated no fewer than 2442 retail shops, and whose, total sales in a year reached the enormous figure of £43,000,000. This concern had the capacity, if it so desired, to take all the lamb produced in New Zealand. When he told them that South Otago was the only company in the South Island supplying meat to the C.W.S., they would see that there might be something more in this move to purchase these works than appeared on the surface. South Otago this season was giving a price on the hooks that was only id per lb behind Canterbury, and if the truth were known was perhaps equal to Canterbury. Another firm, whose representative had also been here, had offered to purchase at Canterbury prices, and freeze at the local works. Farmers should remember that these were their own works, run by a management that was as good as possible. He considered that it would be a fatal, move to sell at this time, and kill the operations of the C.W.S. in the South Island. South Otago’s brand was now well established, and they had got together a good connection, and were able to get the best prices for all by-pro-ducts. The works also had recently been electrified, reducing the cost of running. Certainly tw’O of the freezing chambers needed renewing, but that could be attended to as soon as the necessity arose. It was a curious thing that last season, •among their suppliers there were over 390 who were non-shareholders, and only 140 shareholders were among the suppliers, although 29 of the latter had supplied 19,000 sheep. He would ask them before they decided to sell for £60,000 to go and have a look at the works, and see what it .was that they were selling.

The announcement of the proposed selling price, which was thus disclosed for

the first time, cause da mild sensation in the meeting. Proceeding, Mr Christie stated that in the Catlins bush districts sheep raising was increasing rapidly, and in the Owaka district alone there were now’ 400 sheepmen, where formerly there had been only 40. He would like to emphasise the points that the C.W.S. was now trading with South Otago and was not cavilling at the price charged; that New Zealand lamb was becoming an essential in every butchers shop in the United Kingdom; that £4OOO had been spent in electric machinery at the works last year; that the price of £60,000 was not an adequate one, and that the time was inopportune to sell, when there was a big chance of the works doing better than ever before. They had a capital of £66,000 fully subscribed, and although the company had had a “ rough spin ” at times, it was no rougher than that experienced by other similar concerns that had gone right out of the business. They were producing ice alone in such a quantity that the sale of it was paying all the expenses of the freezing department. Referring to the “ dry ” shareholders, who, he considered, should never have been in the company, he asked: If they wished to make the concern a truly co-operative one, were the non-shareholders, w’ho W’ere suppliers, willing to come forward and buy out the “ dry ” shareholders? That was" important as an alternative proposal to the one the directors were putting forward. There w’ere about 42 per cent. ,of the shareholders who had no interest* in the works except that their money was there, and who would benefit by a sale which would perhaps give them par value for their shares. Dealing with co-operation, the speaker said the Southland Freezing Company had paid a dividend of 12 per cent., but who paid that? It came off the land, of course. Money did not grow of itself.

Mr F. Waite, M.P.: The Southland Company has over £90,000 in investments. Mr Christie: Yes, but where did they get it in the first place?

In conclusion, Mr Christie said that if competition was eliminated in the district there was always the danger that prices to the producer would recede. In order

to get an alternative proposal to selling out, he . had proposed that the company circularise the suppliers as to whether they would buy out the “ dry ” shareholders, but had been “ turned down ” by the directors., Mr Christie invited questions. z

Mr O. R. Throp said he would like it made clear whether the directors had submitted the works for sale or whether an offer had been made to them?

Mr Christie: The directors proposed that the works should be offered for £60,000 to the New Zealand Refrigerating Company, with a proviso that the offer was subject to the shareholders’ consent being obtained. That is why I am here to give a lead to a different line of thought. In answer to Mr Waite, Mr Christie said the Refrigerating Company had a 14 days’ option dating from March 15. Mr Throp said that at the annual meeting of shareholders it had been decided to give the works another season’s trial. That was distinctly the feeling ot the meeting. How, then, could the directors overlook that feeling? Mr Christie: That question is very difficult to answer.

Mr E. King (Clydevale): Mr James Begg clearly gave us to understand at the annual meeting that if a suitable offer to buy was made the directors would serious consider it.

Mr Throp: The point is what latitude did the shareholders give the board at the annual meeting? The works last year certainly showed a little profit, but no depreciation was shown, which might be accounted for by the £4OOO spent in electrification.

Mr Christie: Mr Begg said that if we could not get in the vicinity of 100,000 head through the works, then we must seriously consider selling, but this month we are 7000 better than for the same month last year.

Mr E. F. Pannett (Clydevale) : It has been stated year after year that if the company could not show’ better results the works would have to be sold, and if we now bought out the “ dry ” shareholders, what benefit would accrue? It is stock we want, not shares. The chairman: My idea is to pay off the mere investor, who is out for profit, and leave the works in the hands of the suppliers only. Mr Pannett: The “dry ” shareholders are surely entitled to interest on their money, otherwise that money will in time disappear. Annual meeting after annual meeting the chairman of directors has put it to us that if the number of stock coming to the works does not increase we must sell out. Is it feasible then to say that if we buy shares the stock will then come forward better? I cannot see that.

The chairman: With 42 per cent. “ dry ” shareholders voting for a sale, supplemented by, say, 10 per cent, from the farmer suppliers, that will carry the day. I may tell you that I understand the Southland Frozen Meat Company is acting with the New Zealand Refrigerating Company in this deal. Sir Franks Boys, chairman of the Refrigerating Company, was here to-day, and from what he said to me, I think they will buy. If the shareholders do not agree, it will be by such a narrow majority that the question will arise again and again, and it will be a game of see-saw for all time. In any case the wprks are worth much more than £60,000. Mr Robert M'Lintock said it seemed to him that if the works were such a cheap proposition at £60,000, the suppliers should get together, form a new company, and purchase the works. He thought a stroug company could be formed quickly. Mr Throp said it seemed to him there were three possible lines of action: (1) Sell Out to a strong proprietary company; (2) eliminate the “dry” shareholders; or (3), form a co-operative concern that had no thought for dividends. He had no sympathy with the tradespeople of Balclutha who had invested in the company, because they had got their full return in added population and trade. He believed that if it was true that they were to receive certain backing from Southland, then, they in Otago, would get the same conditions in the meat trade as prevailed in Argentina. Did the small holder think he would have any show then? There was also the danger that the works might only be operated for one or two months in the year, then the staff would have to go, expenses would be cut to a minimum, and the net’result would be very bad for Balclutha. The chairman contended that the freezing works were necessary to the farmer, but not as a dividend-earning business. Mr E. King disagreed, and said the works should be run on business principles, so that anyone holding shares would get interest on his investment. There was no possible hope of South Otago being unanimous on this question of putting lambs in on the co-operative system. He had done it himself, but he liked to be independent, and to be able to sell where he got the best bargain. The chairman: We are against buying in saleyards. It is bad business to boom lambs in that way. Mr King: Yes; but when prices are slack you should go in and buy, and so earn a dividend for all shareholders. It is no new thing, for I have maintained all along that the company should buy “ on the hoof ” when it could not get enough stock to keep the works busy. 1 have heard of cases where 3s and 4s a head more was got by putting through the w’orks lambs purchased at auction, and yet your buyer is not permitted to buy in the yards. The Southland Company made its profits through buying “ on

the hoof,” which was really the only legitimate way to carry on.

In reply to interjections, Mr King said there were farmer shareholders in the Southland concern.

Mr J. Copland (Stony Creek) said he had been putting lambs through for three seasons, and had come out on top everv time.

In the course of further remarks the chairman said he did not see eye to eye with his colleagues on the board of directors in this matter, and he believed the works should be allowed to run another season at all events.

Mr F. Waite said this was a matter of the very greatest interest to the farmers of the district. They had come to the position where the farmers of South Otago should either “ pay up or shut up." It was apparently an accomplished fact that an offer to sell the works had been made, and they were assured that it would be accepted. That meant that in a few' weeks it would be submitted to the shareholders by the directors, and if rejected by them that would be equivalent to a vote of no-confidence in the directors. Those responsible would have to be prepared to put an alternative proposal, and he would suggest that they should set up a committee to find out if the 400 nonshareholding suppliers would buy out the “ dry ” shareholders. He believed from talks he had had with responsible men that the works would be sold, and if there was not a clear-cut proposal to put before the meeting of shareholders that would be called in three weeks, say, it was almost certain that the shareholders would consent to the sale of the works. Mr John Mosley said it should not be forgotten that there were “ dry ” shareholders who did not want to sell. Eventually, on the motion of Messrs James Lockhart (Moneymore) and J. G. Somerville, the following committee W’as set up to canvass the suppliers:—Messrs James Lockhart (Milton), Peter Boyd (Lovell’s Flat), G. Stewart, John Christie (Warepa), Hugh Blaikie (Clinton), O. R. Throp, D. Morgan (Te Hovka), John Roy (Wairuna), Robert Hutton (Balclutha), A. MTntosh, William M'Kenzie (Owaka), A. H. Moffat (Te Houka), R. Hallum, D. Johnston (Hillend), J. J. Cross, S. Winter (Clydevale), John Mosley, Peter Anderson (Inchclutha), D. M'Gregor (Milburn), George Linklater (W T aitahuna). Mr E. F. Pannett, in an explanatory speech, said he was not against the works, but he would like to point out that the chairman was too optimistic. Would the majority of the directors, who were apparently against Mr Christie, listen to an alternative proposal such as he suggested ?

The chairman: I am not so sure that all the other directors favour selling. They say they are going to give the shareholders an opportunity to decide, and in doing that I consider they are giving a direction to sell, and that is why I want to create a different feeling among the shareholders.

_ March 1. It was officially announced to-day by the secretary-manager of the South Otago Freezing Company that an offer of £60,000 had been made for the works. This offer, with the company’s liquid assets, should return the shareholders £5 a share (par value). Should the works be sold, it will be the endeavour of the purchasers io run the works at full capacity next season, and if successful the new proprietary will continue to do so.

Questioned as to what would occur this season, the manager stated that the works would be run as usual until the end of the season.

The coriimittee appointed at yesterday’s meeting decided not to canvass the suppliets as at first proposed, but to wait upon the directors before doing anvthing further.

The general opinion seems to be that the works will be sold.