A shortage of acquisition targets at home was a prime motivator for Dawn Meats’s NZ$270 million (€133 million) bid for a controlling stake in struggling New Zealand meat co-operative Alliance Group.
The Waterford-based company’s bid for 65 per cent of the co-operative received the backing of Alliance’s farmer shareholders in a vote on Monday.
Speaking to The Irish Times, Dawn Meats chief executive Niall Browne said the appetite for red meat was on the rise globally and there were limited opportunities to secure supplies to satisfy that demand.
“Alliance has a good reputation in the international marketplace and for a company like Dawn which has grown to the size it has in Ireland and Britain there is not much more we can grow in those jurisdictions,” he said.
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Alliance, which boasts a network of six processing plants and claims to be the world’s largest sheep meat exporter, began its search for new equity 18 months ago after racking up NZ$200 million of losses and breaching its banking covenants.
Asked whether Dawn could have found a stronger performer in which to invest, Mr Browne noted Alliance’s recent return to profitability.
“We see a lot of potential to save more money, to become more efficient, especially on the beef side.”
He said he saw no reason to close the plants or to replace the management line-up with its own people.
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“We are happy with what we are seeing from the management team. They are very committed and enthusiastic.”
The profitability of the entire NZ meat industry has been severely challenged in recent years by processing over-capacity caused by land use change and dwindling livestock numbers.
Alliance last year spent NZ$50 million closing its Smithfield plant in Canterbury to better match its processing capacity with livestock supply.
Following the closure, Alliance said it believed six to eight more plants needed to close across the industry to remove surplus capacity.
Mr Browne said he agreed with Alliance’s view that its processing capacity was now balanced with the livestock available for slaughter in the regions it operated in and that it didn’t need to close more plants.
“We do note that some of the competition has serious challenges in that space,” he said.
Mr Browne said he was open to “pro-competitive” co-operation between processors to solve the problem.
“If we are approached to look at the processing footprint to try and identify solutions to make the industry more efficient whether that is through toll processing or other synergies then we would be happy to look at that.”
Mr Browne said the response to Dawn’s play for Alliance had been “very, very positive” among customers.
He said he had been approached by Dawn customers at the recent Anuga food fair in Germany eager to lock in 12-month supplies of beef and lamb from Ireland, and counterseasonal supply from New Zealand.
Mr Browne said he was unconcerned about the potential for an exodus of Alliance suppliers to New Zealand-owned rivals, given the 100 per cent farmer-owned co-operative would soon be under foreign control.
“I have already met with shareholders who had lapsed their supply and they are looking forward to coming back.”
Mr Browne said that by getting better performance out of the Alliance business, more money would be freed up to pay its farmer suppliers competitive prices for their livestock and prevent them from straying to rivals.
