Insolvency risk if Alliance Group shareholders vote no to Irish takeover

Thursday, 18 September 2025

Alliance Group processing workers on the job. The company employs about 4600 people at six processing plants across New Zealand.

Alliance Group could pursue asset sales, site closures and cost cuts, attempt to raise capital from shareholders or other investors, or go into insolvency if its shareholders vote no to an investment by Dawn Meats Group, an independent report says.

The proposed transaction would see Irish company Dawn Meats Group invest $250 million to acquire 65% of the shares in Alliance Group, subject to shareholder and Overseas Investment Office approval.

The meat co-operative has released detailed information to its shareholders on the proposed venture ahead of a vote and special general meeting next month.

An independent adviser’s report prepared for farmer-shareholders by corporate adviser Northington Partners, in accordance with the Takeovers Code, is included in the information.

The report said the co-operative would have a “very limited and unlikely set of alternatives” if shareholders voted no to the proposal.

Alliance Group chairperson Mark Wynne says Dawn Meats’ proposal “comes at a very attractive premium”.

Without shareholder support, the Alliance board would be obligated to enter a process led by its banking syndicate and face the risk of potential insolvency because of the unsustainable level of debt the co-operative was carrying, the report said.

It said the Dawn Meats offer was “clearly the best option presented”, the only one that met the strategic and financial requirements, and would offer significant strategic benefits to shareholders.

Alliance Group reported an after-tax loss of $95.8m on a turnover of $1.8 billion for the 12 months ended on September 30, 2024.

This loss included a one-off post-tax cost of $48.2m related to restructuring, including the closure of its Smithfield plant at Timaru.

An aerial view of Alliance’s Smithfield site at Timaru. The plant closed in October last year, resulting in about 600 job losses. The closure was attributed to declining sheep processing numbers and the need to reduce surplus capacity within the company’s network.

Chairperson Mark Wynne encouraged farmers to read the scheme booklet and the independent report to help them make an informed decision on the proposal.

“The release of this information to our shareholders, including the independent assessment prepared by Northington Partners, follows a robust two-year process to reset and recapitalise the business and explore all available options,” he said.

“This essential capital investment by Dawn Meats will strengthen our financial position, enhance our operational capabilities and enable us to create and extract more value in market.

“Not only will it give us the capital we need to thrive alongside a complementary partner with shared values and shared operational excellence, but as outlined in the independent adviser’s report, it also comes at a very attractive premium.”

Alliance Group has rolled out technology that uses AI to quickly assess the quality of lamb or beef carcasses. Group technical manager Gary Maclennan explains how the MEQ system works while Amelia Beckham demonstrates the process.

The Northington Partners report assessed the midpoint of Dawn Meats’ investment at $1.18 per share, which was a 93% premium over its own midpoint equity valuation.

The co-operative, through its retained 35% shareholding, would hold two out of five directorships and would have veto rights for a number of major decisions, Wynne said.

“This safeguards the interests of our farmers, provides certainty and unlocks future value. Importantly, the independent report also makes it crystal clear that the alternative options are very limited.”

The proceeds would be used to reduce Alliance’s short-term working capital facility by about $200m, accelerate the board’s strategic capital expenditure programme, and enable the distribution of up to $40m to the co-operative, subject to livestock supply.

Under the proposed distribution, up to $20m would be released from the joint venture company to the co-op at the end of the 2026 financial year, subject to livestock targets being met.

Alliance Group’s plant at Mataura, Southland.

The co-op would then distribute up to $20m to shareholders with up to $9m (or 45%) paid as a dividend and up to $11m (or 55%) paid as a rebate.

Up to $20m would be released as the second tranche from the joint venture company to the co-op at the end of the 2027 financial year, subject to livestock targets being met.

The co-op would then distribute up to $15m (or 75%) as a rebate to shareholders and retain up to $5m for capital reinvestment.

The rebate is calculated on the average stock supplied over the prior two years plus the current year and capped at the level of shares held.

The proposed transaction would require 75% of shares voted to vote yes, and more than 50% of the total number of shares in Alliance to vote yes.

The special general meeting will be held in Invercargill on October 20.

Alliance Group employs about 4600 people across its plants at Dannevirke, Levin, Nelson, Pukeuri near Ōamaru, Mataura, and Lorneville near Invercargill, though the workforce can increase to about 5000 during peak seasonal periods.