By PHILIPPA STEVENSON
agricultural editor
One-time mega co-op doubter and new Dairy Board chairman Graham Fraser is putting his weight and influence behind the industry's proposed mega-merger.
"Having reached the point of agreement that we need to go to MergeCo we need to do it. Actually do it," he said pounding
the table for emphasis in his Wellington office.
Speaking in depth for the first time since becoming chairman on October 12, Mr Fraser told the Business Herald of the reservations he had overcome and now the urgent need for progress on the 4-year-old plan.
"We have to get the ship rolling, the business constructed and operational. The target date is June 1 next year which is pretty tight. There's a lot of work to be done between now and then; so people like myself need to give it as big a push as they can."
Mr Fraser said the critical merger between his own company, New Zealand Dairy Group, and Kiwi "sure is" holding things up.
The two largest companies needed to made their minds up before the middle of December, he said.
"Nothing happens until those people are able to agree. What we can do from here is encourage them and have them understand that time is ticking by. They need to decide whether they can come to a commercial arrangement."
The abrupt resignation of longtime merger backer Doug Leeder from the Dairy Group chairmanship had not affected the agreement on shareholding reached at a summit last month. "That's solid," he said of the deal.
Mr Fraser said much of the detail on the mega co-op could be worked out after the companies had agreed to merge but work was already underway. The proposal also depends on Commerce Commission approval and the support of 75 per cent of farmers.
"We are working on a series of tasks now on the assumption that these [three] things will occur because June 1 is not too far away." Mr Fraser acknowledged his early doubts about the industry's ability to run a single company that was efficient, innovative and forward moving.
He had hoped that coordination would arise from a product pricing mechanism between the exporting board and the large manufacturing companies "but now we have two organisations [Kiwi and Dairy Group] that are not content to respond to that sort of system."
It was now "beyond argument" that the industry needed to integrate manufacturing and marketing, he said.
"I'm still cautious on this issue, make no mistake. I'll be doing whatever I can to ensure the way this business is set up is going to minimise the effects of having a single entity that purchases the farmers' milk."
He said farmers were desperate for information "and I'm desperate to be able to provide it to them."
There were issues that needed to be settled so solid information could be put to farmers but he was keen to have at least three consultation sessions before a vote was taken.
There appeared to be little scope for sharemilkers, who milk 40 per cent of the national herd, to have shares in the mega co-op but the establishment board was investigating how sharemilking contracts could cater for different payment streams.
Mr Fraser said the contentious issues of external investment and share tradability had been put on hold "to give ourselves some time to discuss our ambitions. Do they require such large injections of equity that we cannot afford it ourselves?"
He said the business plan showed no need for external equity for about three years and "beyond that it will depend on the rate at which we expand the business."
There was also the already used option of joint ventures which did not dilute farmers' ownership.
It needed to be established whether farmers had to compulsorily invest in the non-traditional business, where the industry used its "expertise and skills to make profits as opposed to marketing New Zealand farmers' milk."
The question to be discussed was not moving the ownership away from milk producers but whether ownership needed to be in direct proportion to milk supplied, he said.
Mr Fraser said it was "just good business" that NZ Dairy Foods, the local market company identified for sale if the mega co-op proceeds, was exploring opportunities in Australia.
