Farmers pushing hard for merger

By PHILIPPA STEVENSON

agricultural editor

Last week's amalgamation of Kiwi Dairies and Northland has put the majority of the country's 14,500 farmers in two camps - 7700 in New Zealand Dairy Group, 5900 in Kiwi.

But in the past two weeks, both groups have firmly told their company directors they want the division to be only a temporary staging post before total integration of the companies and the Dairy Board into the mega co-op.

At Friday's Northland meeting, which voted 97.47 per cent in favour of merging with Kiwi, a recommendation by farmer Roger Taylor that the new Kiwi board "vigorously pursue" negotiations with Dairy Group was carried unanimously by the audience of 600.

Mr Taylor urged that the talks take priority over any offshore negotiations. "We need to get our own house in order before we go overseas," he said yesterday.

The week before in the Waikato, Dairy Group supplier representatives also gave their directors the message to "get on and negotiate."

The chairman of Dairy Farmers of New Zealand (DFNZ), Charlie Pedersen, has consulted nationwide and found only a few farmers with what he calls "right wing" views who believe their companies should go it alone.

"The overwhelming majority of farmers DFNZ has spoken to want to see MergeCo as the preferred option."

According to industry sources the companies have reached an impasse in their merger talks and, while Kiwi chairman John Young declined to describe it that way, he confirmed the big cooperatives were stuck on "what constitutes value in a dairy company."

Conservative Dairy Group is hung up on debt levels, as it illustrated last week with its opposition to the Kiwi-Northland merger over the $112.5 million payment to compensate existing Kiwi suppliers.

Dairy Group dismissed its own $80 million cash payout, and the loss to its equity of half the $400 million value of local milk company Dairy Foods, which went to its North Island shareholders this year in the deal to secure the South Island Dairy Co-op merger.

The company has factory upgrades planned in the north, and in taking on the burgeoning South Island supply it also bought into massive future processing costs.

Mr Young, whose company has just completed factory upgrades, insists that the real value of a company is what it can pay out to its farmers, and in that both companies have been consistently even. The only thing that matters about debt is the ability to service it, he said.

Mr Pedersen rejected a negotiation impasse as "bunkum. There is always a deal to be done." Time would solve it, he said.

"For history to judge this group of Kiwi and Dairy Group directors in the right light, they need to go to the point where they put a merger proposal to their suppliers. If they don't do that, then they will have misled us and the nation, and missed the opportunity of seeing what a global strategy could deliver for New Zealand as a whole. They owe it to the history of the dairy industry, and the history of co-operativeness to keep trying."

From Northland, Mr Taylor urged Kiwi and Dairy Group to consider using an arbitrator and having independent due diligence to progress the negotiations.

Meanwhile, the only light on dairy farmers' horizon this Christmas is a meeting on Thursday between Dairy Board chairman Graham Fraser, and the Kiwi and Dairy Group chairmen and chief executives.

Ostensibly it came in response to the call by Dairy Group chairman Henry Van Der Heyden for the MergeCo business plan to be fast-tracked. But Mr Pedersen said he would "be very disappointed if it wasn't already on as fast a track as possible."