Fairness query on dairying takeover

By Philippa Stevenson

New Zealand Dairy Group suppliers sick of sacrifice for the greater good may baulk at the company merger touted as pivotal to the industry's future.

The Hamilton-based company last week completed a series of 54 meetings promoting the gains of the proposed takeover of the South Island Dairy Co-op (Sidco) to its 6830 shareholders.

Tomorrow, Sidco begins a pitch to its 926 shareholders, whose acceptance of a favourable deal is widely regarded as a foregone conclusion.

But some North Island farmers have told the New Zealand Herald the message to them has been nowhere near an outright winner.

"They can handle the concept [of a united industry]. They want that," said Kevin Wooding, the president of Waikato Dairy Farmers.

"But it is just the terms. They're asking, is it fair?"

In a comprehensive merger document sent to shareholders after the meetings ended, which has also annoyed some farmers, the two companies emphasise the merger's "ability to lead the way in the creation of a mega-cooperative."

"The real merits of this merger are that it represents a major step towards the goal of a united dairy industry, and this in turn has the potential to deliver major improvement in payout," the firms say.

However, Mr Wooding said farmers believed the mega-cooperative would work only if it included Taranaki's Kiwi Dairies, and "they are the hard one to get in."

Kiwi has sought Commerce Commission approval for its own planned merger with Sidco. It has appealed to the High Court against the commission's ruling in February denying it clearance.

And it gained a boost last week when, in a draft determination, the commission u-turned and authorised a Kiwi/Sidco merger because the public benefits would outweigh concerns about dominance in the acquisition of raw milk in the South Island.

In the ruling, the commission also queried the backing that Dairy Group shareholders would give their firm's plans.

"It is not clear whether the [Dairy Group] shareholders in particular will approve the merger because of the threat that it might pose to the level of their payout, Sidco having a lower payout," the commission said.

Mr Wooding believed the decision would "come down to the wire" at a Dairy Group meeting on April 14 because farmers were being asked to forgo income for the good of the industry.

Another farmer, who declined to be named, said sacrifice was being sought yet again.

"There's a whole long list from nearly every merger. We've given ground again and again."

He said there was huge interest in the plan, with some farmers attending up to four meetings.

Raglan farmer Jenni Vernon said she and her husband, Gordon, were looking at the bigger picture and favoured the merger, but another supplier predicted the vote would be "bloody close to 50:50."

"Most people are concerned that our equity ratio declines," he said. "It could tumble because of the terms."