Investors critical of Allied's new deals

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Allied Farmers' shareholders got stuck into the company's board and management yesterday, accusing it of not sticking to its rural roots.

The accusations flew at Allied's annual meeting in Hawera, where for more than three hours the Taranaki-headquartered company faced up to a backlash over its $400 million bid to buy the assets of Hanover Finance and United Finance. Despite the fact there was obvious general buy-in to the company's move to bulk up its size and financial muscle, a large number of the 150 present still gave vent to their feelings.

"You're not attending to your core business properly," one Hawera shareholder said. "You must attend to me and all your other minor shareholders – all us little people. I'm warning you that if the head doesn't work, then the tail won't wag."

And a particularly vocal critic was millionaire Auckland businessman John Hynds, Allied Farmers' second-biggest shareholder with more than 4.8 million shares, who accused the firm of ignoring opportunities to grow its rural business in favour of growing its finance business. As a result, Allied Farmers' core business was now finance, with a small rural business on the side.

"Finance historically serviced our rural customers and was an essential service allowing those customers choice," he said. "Now we have a finance business dealing with all manner of risky activities, lending to people who have little or no interest in the rural sector."

But the Allied representatives defended the investment proposal, claiming the transaction would give the company the capital needed to improve its rural services.

"For Allied shareholders the proceeds that we gain from collecting the Hanover Finance and United Finance assets can be redeployed throughout our rural and finance businesses," chairman John Loughlin said.

He added that due to the uncertainty of the assets to be acquired, Allied had devised a unique mechanism to protect the interests of existing shareholders.

"In essence, the Hanover and United debenture holders will retain all the of the risks of the collectability of the assets acquired – the same underlying risks as the existing moratorium or a receivership," Mr Loughlin said.

The proposed transaction offered Allied the opportunity to move swiftly from past adversity to future opportunity, the meeting was told.

"I would encourage shareholders to think positively," Mr Loughlin said.

One shareholder said although he felt uncomfortable about the bid to buy the Hanover and United assets, he was happy the transaction had been well-researched – "and I congratulate you for that," he said, to applause from the rest of the meeting.

In their annual report, Mr Loughlin and chief executive office Paul Macfie said that in the year ended June 30 the company experienced a roller-coaster ride.

A pre-tax operating loss of $7.1m for the group was in stark contrast to the $8.2m operating profit for the previous year, they said.

Global events over the 12 months and a sharp decline in the Fonterra payout in November had a significant impact on farmer customers.

Speaking to yesterday's meeting, Mr Loughlin said while the first few months of the current financial year had reflected farmers working in survival mode, this month's announcement of the $6.05 dairy payout resulted in a lift in activity in the company's merchandise, livestock and real estate businesses.

"We are not seeing a new boom, but it is nice to see some normality return to trading conditions," he said.

- © Fairfax NZ News