Rival firms' fowl feud
Australia's chicken industry has been plagued by scandals in recent years, from evidence of illegal and sometimes dangerous conditions for processing workers to misleading claims about how birds are raised.
Now two of the country's biggest private poultry farmers are embroiled in a bitter fight to control almost 20 per cent of the chickens eaten in Australia each year.
The battle has caught the attention of the corporate regulator, as the savings of about 2500 mum-and-dad investors is at stake.
Rural Funds Management, which controls an estimated 9 per cent of the national flock, is trying to merge its chicken, almond and wine investments into one fund that will be listed on the Australian Securities Exchange.
At the same time, RFM is fending off a $22.5 million cash bid for a half-stake in its chicken businesses from rival ProTen - an unlisted company that also controls almost 10 per cent of the nation's flock and breeds chickens to supply household brands such as Steggles, Lilydale and Baiada.
RFM management is vehemently opposed to the ProTen offer, despite an independent expert's report recommending it to be in the best interests of the majority of its investors.
The stoush comes amid rising prices for both chicken meat and eggs in Australia.
An outbreak of bird flu has shut down two poultry farms in NSW and sparked a national egg shortage that will take between six and 12 months to abate.
At the same time, rising grain prices on global markets have almost doubled the price of chicken meat this year.
The battle for control of RFM has sparked a sometimes dirty war between its management and the raiders from ProTen.
RFM claimed that ProTen was in financial difficulty and did not have the financial capacity to buy a 51 per cent stake in RFM's Chicken Income Fund, which controls the bulk of its poultry assets.
ProTen has offered 70¢ a unit to investors in RFM's Chicken Income Fund.
RFM told the estimated 2500 unit holders in its Chicken Income Fund that ProTen needed to borrow money at high interest rates, and "the reason that ProTen has utilised such high-cost debt is because they could not borrow any more from a bank".
Those claims have since proved to be false.
In an open letter published on its website, RFM executive manager Andrea Lemmon last week apologised to ProTen for making false statements about its offer.
Still, RFM maintains that its merger and listing are superior to ProTen's offer.
RFM said on its website that ProTen's conditions were "unlikely to be attainable" and if successful would create uncertainty for the 49 per cent remaining unit holders of the fund. "It is not an offer for all ... unit holders."
RFM also said that ProTen's bid was "below the net asset value of the RFM Chicken Income Fund".
This was despite an independent expert report from Crowe Horwath, which was commissioned by RFM, stating the ASX listing proposal was "not fair" and would dilute the value of units in the chicken fund to between 58¢ and 65¢.
The ProTen camp has pointed to the high annual management fees RFM charges the Chicken Income Fund, alleging a conflict of interest is behind the reticence of RFM's management to accept its bid.
Accounts show that $1.7 million was collected in 2011-12, up 12 per cent from the previous year.
On RFM's website it said the listing proposal would lead to lower administrative and management costs, although it did not specify what those savings would be.
When contacted by Fairfax, Media RFM managing director David Bryant said: "We are not able to comment any further."
ProTen has complained to the Australian Securities and Investments Commission. An ASIC spokesman declined to comment.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free