ROCKYFORD, Alta. — Making pork producers shareholders in Fletcher’s Fine Foods has not turned out to be an easy manoeuvre.
Following a producer vote two years ago to take shares in the meat processing company, the Alberta Pork Producers Development Corp. expected to complete the deal within a year. However Fletcher’s creditor, the Royal Bank, has said there is no deal until $10 million worth of equity is pumped into the Red Deer-based processor.
Further, the Alberta Securities Commission won’t issue a prospectus on the share offer until that equity demand is filled, said Burt Jorgensen, a director with the pork producers.
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The original idea was to distribute shares to producers based on the number of hogs they sold between 1981 and 1985. This is called the extra levy period, when pork producers paid a $2 checkoff on each hog to enable their corporation to take over the shares in Fletcher’s. About 8.5 million hogs were sold during that period.
Idea supported
The pork board approved an equity injection plan last December and presented the idea to producers at local meetings held around the province last week. The majority of producers supported the idea, said Ed Schultz, manager of the pork corporation.
The board will come up with $5 million and Fletcher’s has been challenged to find the other half, said Jorgensen. The corporation has several proposals to raise money and these will go before the board’s meeting in April. The board wants the deal closed by July 31.
The first is to offer additional shares for cash to current producers who sold hogs from November 1985 to Dec. 31, 1992. If there is a shortfall, the board will buy up the remaining common shares and sell them to producers.
If the amount raised is less than the required $5 million the corporation will, if necessary, borrow money to buy up the shortfall. The board will then sell those shares after June 30, 1994 at a price of $1.29 each, said Schultz.
However some producers at a district meeting in Rockyford said they weren’t sure if they wanted any shares in Fletcher’s since they could see no past benefits in the pork corporation controlling the packer.
New director Doug Hall said the main benefit in owning Fletcher’s was that having several processors in the province kept the industry competitive and stable.
Unfair competition
Schultz told producers Fletcher’s didn’t show a better profit picture because of unfair competition from Gainers Inc., which was run by the provincial government after its owner Peter Pocklington defaulted on a loan guarantee.
When it comes to labor costs, buying hogs and operating expenses, the two packers were comparable. However with government control and subsidization, Gainers was able to sell meat products below cost, hoping to make up for lower prices by selling higher volumes, Schultz said.
“We were facing a competitor in the market that was not responsible for its bottom line,” he said.
