Waterford-based Dawn Meats $250 million New Zealand dollars (€128 million) offer for a controlling stake in one of the country’s biggest meat co-operatives represents a 93 per cent premium to its fair value, according to an independent appraisal.
New Zealand’s Alliance Group is a farmer-owned co-operative that describes itself as the world’s biggest exporter of sheep meat.
The guidance was part of an information pack distributed to Alliance’s 4,300 farmer shareholders on Thursday ahead of a vote next month on Dawn’s offer for 65 per cent of the meat co-operative.
An assessment by New Zealand investment bank Northington Partners gave a valuation range with a midpoint of NZ$0.61 (€0.30) for each Alliance share, compared to Dawn’s offer of NZ$1.26 (€0.63) a share.
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Despite Alliance’s pretax losses totalling NZ$200 million (€99.7 million) in 2023 and 2024, Northington’s valuation assumes a turnaround in 2025 with a pretax profit of NZ$86 million (€42.8 million), as operating efficiencies and a rebound in overseas markets improve its bottom line.
Annual “maintainable” pretax profits of NZ$75 million (€37 million) were assumed thereafter.
Even with the improved outlook, Northington Partners backed previous claims by Alliance management that a failure to accept Dawn’s offer would leave the co-operative at the mercy of its banking syndicate, facing possible asset sales or insolvency.
“Dawn Meats investment clearly represents the best option of the offers and is the only alternative capable of delivering the level of new capital that is required by Alliance’s banks,” the investment bank said.
Despite the lack of credible alternative bidders, Northington said the hefty premium from the Irish company reflected “the strategic value of the partnership to Dawn and its expectation of future benefits which may accrue to all shareholders”.
Expected synergies included complementary farming seasons between the northern and southern hemispheres enabling year-round supply to customers, improvement in beef carcass yields as Alliance gets a spin-off from historically heavy investment by Dawn Meats in its processing technology, and collaboration in marketing.
Alliance is expected to push further into the British and European markets through Dawn’s sales network.
Dawn also appears to have further de-risked its investment with a price adjustment mechanism also revealed in the information pack.
This would see Dawn receive a dollar in compensation for every dollar Alliance falls short of the NZ$77.2 million (€38.4 million) Ebitda (earnings before interest, tax, depreciation and amortisation) for the year to September 2025.
If it fails to achieve NZ$67.2 million (€33.4 million) Ebitda, NZ$3 compensation is due for every dollar of shortfall on the basis “such a differential represents a structural decline in the value of Alliance,” Northington Partners noted.
Compensation would be in the form of preference shares to be redeemed for cash payable out of Alliance’s future profits.
The arrangement is mirrored on the upside, with Alliance shareholders eligible for additional payments from Dawn if Ebitda targets are exceeded by the same amounts.
Based on Alliance’s forecasts and Northington’s own view that there was “more downside risk to actual results than upside, we expect that the ultimate price adjustment will likely range between negative NZ$15 million (€7.4 million) and positive NZ$5 million (€2.4 million)”.
“Under these scenarios the final value of Dawn Meats investment is likely to fall within the range of NZ$1.05 (€0.52) to NZ$1.31 (€0.65) compared to NZ$1.26 (€0.63) per share under a nil price adjustment scenario,” the investment bank said.
Alliance shareholders will vote on the offer on October 20th.
