Farmers and small factory challenge dairy giant

By PHILIPPA STEVENSON and NZPA

Tatua Dairy Company is talking with a group of Waikato dairy farmers preparing to battle mega-cooperative GlobalCo in the domestic milk market.

The farmers' Great New Zealand Milk Company (GMC) has been rallying troops in the Waikato in a bid to buy out New Zealand Dairy Foods and set up in domestic competition to the newly formed Global Dairy Co.

GMC director George Moss said a partnership with independent milk companies Tatua or Westland was a real possibility.

"It would be our own loss if we didn't."

Tatua chairman Alan Frampton confirmed there had been discussions with GMC.

"Tatua is interested in everything, all the opportunities that might be available we would certainly have an open mind about."

He said there was a real possibility his small, single factory company could process milk for the farmers.

Ownership of Dairy Foods' shares is divided in half. The A shares are held by New Zealand Dairy Group, to be part of GlobalCo, and non-voting B shares are held by 6800 North Island Dairy Group suppliers.

To maintain competition in the domestic market, the Government has required GlobalCo to divest Dairy Foods, which has nearly half the domestic dairy products market. Its main rival is Mainland, which GlobalCo will retain.

Dairy Foods executives have talked about the potential to buy some of their milk from sources other than GlobalCo.

Mr Moss, a Tokoroa farmer, said GMC hoped to get enough farmer shareholder support to create a holding company for farmers' shares or get a mandate from farmers by getting their proxy votes.

"It means we're at the negotiating table, not under it, when it comes time to work things through."

Farmer meetings held throughout the Waikato have been well supported with 1500 farmers, who own 23 per cent of the B shareholding, already behind the proposal. GlobalCo's holding in Dairy Foods, which last year had revenue of $390 million, is estimated to be worth about $130 million.

Victoria-based National Foods has also shown interest in Dairy Foods, but the move is complicated by Dairy Group's 18 per cent ownership of the Australian company. Last week Dairy Foods appointed investment bank ABN Amro to broker the sale of shares.