25 July 2008
News release
PwC Report On Proposed Meat Partnership Released
A summary of a PricewaterhouseCoopers (PwC) business case used to prove the merits of the proposed partnership between
Silver Fern Farms Limited (Silver Fern Farms) and PGG Wrightson Limited (PGW) has today been made publicly available.
The 36-page report is a summarised version of the larger Business Case Report that PwC presented to the boards of Silver
Fern Farms and PGW prior to the announcement last month of the proposed partnership. Whilst truncated due to the
commercial sensitivity of much of the information in the Business Case Report, the Summary Report captures the key
thinking behind the decision to table the proposal. It reflects what the directors of both companies have seen as a very
compelling case for the partnership to proceed.
When approved, the proposal would see PGW invest in Silver Fern Farms, and the two companies working together to create
an integrated supply chain within the farm gate, feeding into the existing red meat supply chain and thereby fulfilling
the ‘plate to pasture’ vision.
The Summary Report includes discussion of the proposed business structure, the operating model and the estimated costs
and benefits associated with the partnership. It adds to a considerable weight of information already released -- in the
initial announcement of the proposal on 30 June and the publication of a White Paper available on both companies’
websites.
The next step will be the publication of an Explanatory Memorandum for SFF suppliers next month.
This approach – the release of comprehensive information relating to the partnership – has been undertaken to ensure
that the SFF suppliers have all the information they need to make what is a crucial decision for the future of their
industry.
The Summary Report also lays out the mechanism under which other processors could join the partnership, including detail
on how PGW’s shareholding and right to appoint directors would reduce.
PwC identifies the key quantifiable benefits of the proposal to be:
• Enhanced supply profile – consisting of smoother stock volumes through Silver Fern Farms and resulting processing
efficiencies,
• Cost synergies – consisting of savings in corporate overheads and the livestock procurement function
• In-market benefits – increasing average revenue through an increased proportion of chilled lamb and price premiums for
specification, and
• On-farm productivity gains – resulting from an increased average weight of stock processed, with associated processing
efficiencies.
PwC concludes that the expected annual benefits of the partnership are $59 million in the short term and $111 million in
the long term. It also notes that this does not include unquantifiable benefits such as anticipated gains from a more
efficient procurement model and the participation of other companies.
A copy of the Summary Report is available on both the Silver Fern Farms and PGW websites, respectively:
www.silverfernfarms.co.nz
www.pggwrightson.co.nz
ENDS