IKGA Raises Alarm Over Zespri’s AGM Tactics

IKGA Raises Alarm Over Zespri’s AGM Tactics

Shareholders in Zespri are being warned over moves by the company to push through resolutions at its upcoming AGM that could see the company selling foreign kiwifruit in competition to New Zealand grown fruit and splitting its shares.

The Independent Kiwifruit Growers Association says Zespri wants shareholder approval to allow it to move away from the core-business of buying and marketing New Zealand grown fruit and says all shareholders should be concerned at the way in which Zespri is going about it. IKGA Chairman, Marcus Wilkins says shareholders must ask Zespri why a resolution seeking shareholders permission to purchase foreign kiwifruit for the next 3 years is included in the same resolution as Zespri asking for permission to continue investing in the development of new kiwifruit varieties.

“The proposed resolution 7 in Zespri’s notice of AGM contains two separate and distinct activities and should be dealt with by separate resolutions. By attempting to lump the two together, shareholders who agree with the investment in new varieties and want that to continue will be forced to approve the purchasing of foreign kiwifruit for 3 years whether they agree with that activity or not.”
Mr Wilkins said IKGA was totally opposed to any move that would allow foreign grown fruit to be sold in competition with New Zealand grown kiwifruit.

“Zespri shareholders may well support a further three year extension of the new varieties program but not support the purchasing of foreign kiwifruit or may want to limit their approval of that activity to a shorter time frame or to Northern Hemisphere supplies only.“

“The real meaning in Zespri’s AGM resolutions is hidden behind a smokescreen of Zespri PR “Spin” in the notice of meeting. Resolution 7 is described as “endorsement of 12 month supply strategy and long term investment in new varieties” when it is clearly a deliberately sneaky attempt to get shareholders to approve non-core activities.

“Zespri seems to be distinguishing between the two resolutions on the basis that buying foreign kiwifruit and developing new varieties is necessary for their core business of purchasing and exporting NZ grown kiwifruit. We fail to see how buying foreign kiwifruit can be described as being part of Zespri’s “core business” of buying and exporting NZ grown kiwifruit.”
“We are also fighting this on behalf of the many kiwifruit growers who are not Zespri shareholders who will be severely affected by any such moves, but have no say in the matter because they have no shareholding in the company.”

IKGA is also seeking a “please explain” from Zespri over what the company describes as its” 12 month supply strategy” especially with regard to what the company is up to in Chile.
“IKGA understands that Zespri Directors and Executives have been travelling to Chile over recent months . Shareholders and growers should question this spending when most of Zespri’s gold crops have now died off in
Chile due to disease and ,most importantly, Zespri should be putting its resources into actively and vigorously competing with Chile in all relevant offshore markets.

“Growers would be rightly concerned if arrangements are being put in place for Chilean green kiwifruit to again be purchased and packed with Zespri labels in Zespri packaging at a time when Zespri has been publicly boasting of the superior returns NZ grown kiwifruit has been obtaining over Chilean kiwifruit in markets such as Korea and elsewhere. Growers would want to know how this will enhance the position of the Zespri brand and NZ’s reputation as well as increasing the overall wealth of NZ growers and, if it can be demonstrated that this indeed will happen, whether such supply is being sourced from Chilean orchards with NZ interests.”
Before approving this resolution, Mr Wilkins said shareholders should be provided with detail from Zespri showing exactly which countries the foreign kiwifruit is being sourced from, whether Zespri grade standards will be applied in the same way that they are to NZ grown kiwifruit and what payment arrangements are transacted e.g. whether offshore growers will be getting paid per kg or by the tray and whether they have to wait as long as NZ growers before final payment is made?
He said that the explanatory notes in the notice of AGM do not supply any of this information and shareholders will no doubt be looking for a fuller explanation at the meeting before considering the resolutions that are proposed.

“IKGA is questioning why approval from shareholders was not sought previously for the 12 month supply strategy.”

IKGA is also questioning the just released notice of a special general meeting to be held immediately after the AGM to approve a 1:5 share split. According to the notice to shareholders this resolution was omitted from the AGM notice and so a SGM has to be held to approve the split. The move was signalled in the company’s annual report as being planned for September and it is surprising , therefore, that it was not in the Notice of AGM. IKGA notes that it was also signalled in the Annual report that the Board of the Company is considering a share issue and “buy back” for 2011/12 or later.

The annual report states that the share split is an attempt to get a closer match of one tray of production to one share and to make shares “more accessible” to growers. IKGA does not know how the 1:5 ratio was calculated when the Zespri website shows that a ratio of 3.6 trays to each share was used for calculating the share to production alignment last year. The company’s Annual report states that there are 24.1 million shares on issue and the company sold 98.5 million trays of NZ Grown kiwifruit. “By our calculations that makes a split of just over 1:4 not 1:5 “ said Mr Wilkins.

The1:5 split seems to be based around an average trading price of $5 which has nothing to do with production. “We fail to see how this move will make shares more accessible. The only way this could occur would be if existing shareholders who are over shared or dry shareholders decide to put some of their shares on the market for sale. Those shareholders are not going to sell down their shareholdings for $1 per share and the most likely outcome will be a greater return to them than if there had been no split. This looks more like an offering of leftovers without any gravy to those growers who have no shares or are under shared and have little or no say in how shares in the company are dealt with. More shares at a lower price does not mean greater accessibility.

IKGA believes that the real issue is the fact that the company is a corporate and not a co-operative. Shareholdings and production should be aligned and the issue of dry shares dealt with in a way that ensures grower control as well as ownership before any share split occurs. Proceeding with the share split as planned only risks creating further inequity between growers and shareholders.
IKGA wonders if this hasty move to address the shareholding structure is in response to the questions IKGA has been raising on this issue. IKGA notes that in another move which seems related to IKGA asking Zespri why it cannot pay more money to growers sooner Zespri has decided to advance some payments to growers from November to September. As already noted by IKGA this is unlikely to be the end of the “good news” for green growers with IKGA predicting a significant lift in returns to be announced at or before the AGM.

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