Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

Farmers to vote on fate of giant co op merger plan

If the merger with Farmlands goes ahead, the business will have a customer base of more than 54,000 members. Photo / Christine Cornege
If the merger with Farmlands goes ahead, the business will have a customer base of more than 54,000 members. Photo / Christine Cornege

Farmers up and down the country will soon decide the fate of a proposed merger of South Island rural supplies co-operative CRT with its North Island equivalent, Farmlands, which would create an entity big enough to rival Fonterra's retail chain, RD1.

Members of both co-operatives will vote in two phases, on February 12 and 27. The first vote will require 75 per cent support to take the merger further and the second vote requires 50 per cent support for it to proceed.

Hawkes Bay farmer Sam Robinson, who served on the Farmlands board from 1996 to 2008, said it was an important decision for both groups of shareholders.

"I think it [the merger] will be a positive outcome for merchandise retailing for farmers in New Zealand because it will give them the strength to compete with the other co-operative, RD1," he said.

Farmlands and CRT provide farm supplies and negotiate discounts on farm services such as power, insurance, fuel and fertiliser, and offer advice. They trade in the same space as RD1 and NZX-listed PGG Wrightson.

About $1.3 billion of business was transacted with CRT in the year to March 2012. CRT has 26,000 shareholders and members' interests were worth $59 million last year. In Farmlands' case, $800 million of business was transacted in the year to June 2012. Farmlands has more than 28,000 shareholders and its total equity amounted to $47 million.

Farmlands directors Hugh Ritchie and former Federated Farmers president Charlie Pedersen resigned last week because they wanted to correct the impression the board was unanimous in its support. Pedersen said then that he had reservations about the merger plan.

"We are not trying to instruct shareholders to vote against it," he said. "We just want them to at least go through the information and have a good look at it before they cast their votes."

The plan has the unanimous support of the CRT board.

Both co-operatives are among New Zealand's fastest-growing merchandising operations.

Feasibility studies done by CRT show potential benefits to CRT shareholders of $38 million over the next three years after allowing for merger costs.

If the merger with Farmlands goes ahead, the business will have a customer base of more than 54,000 members, a workforce of more than 1000 staff, will operate 47 farm merchandise stores in the North Island and 31 in the South Island compared with RD1's 64 stores.

A statement from board members who have served on the Farmlands board in recent years came out strongly in favour of the merger.

- APNZ

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