The board of Silver Fern Farms has unanimously backed a deal that would see Shanghai Maling, a listed company 38%-owned by Bright Foods, take 50% control of the New Zealand meat cooperative for NZ$261m (US$165.4m).

If the deal gains shareholder approval, the co-operative plans to redeem the 5.5m supplier investment shares it has outstanding and pay a special dividend of $35m, or 30 cents per share, to shareholders. Existing ordinary and rebate shareholders will retain their current shares and supplier shareholders will continue to supply their livestock to the company, chairman Rob Hewett revealed.

Hewett continued that the intention going forward, subject to board approval at the time, is for Silver Fern Farms to return 50% of profits every year to its two shareholders – Shanghai Maling and Silver Fern.

Silver Fern initially indicated its intention to seek external funding late last year. The group's shares suspended trading in July as the process progressed.

"The board considered many options for new capital, both locally and internationally, but Shanghai Maling stood out for the enormous opportunities and ongoing benefits for the Co-operative, its shareholders and supplying farmers," Hewett said.

"We are very excited by this partnership proposal with Shanghai Maling and believe they are the best partner for Silver Fern Farms. Our values are closely aligned. The proposed deal has many long-term benefits for the co-operative including full support for our global ‘plate to pasture’ strategy, and the means to accelerate the strategy in a number of key markets as a result of the investment of substantial new capital."

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If approved, the agreement would see Silver Fern Farms in a cash positive position at year end, Hewett continued. This would allow the company to "reinvest more aggressively", return cash to shareholders and "maintain competitive procurement prices" for livestock suppliers.

The news has raised some concerns in New Zealand over the country's largest meat exporter falling into foreign ownership. But CEO Dean Hamilton insisted Shanghai Maling brings more than cash to the table. The company also wants to leverage the relationship to expand in China.

Hamilton explained: "This has the potential for us to establish a unique position in what is the fastest growing red meat market in the world. Shanghai Maling’s integrated supply chain model will allow us to advance our product development and consumer marketing abilities in that market in ways we could not do ourselves, or with any other local or international investor.

"Silver Fern Farms will continue to be responsible for its sales and marketing efforts in China just as it is in other countries around the world. Where it makes sense for all parties, we will be working with Shanghai Maling to create products in New Zealand specifically for China, and will leverage its (and Bright Group’s) significant wholesale and retail networks. We expect the in-market relationship to build naturally over time."