Marathon talks precede merger details' release

By PHILIPPA STEVENSON

agricultural editor

New Zealand Dairy Group and Kiwi Dairies have had marathon merger talks ahead of today's expected release to shareholders of earnings forecasts from an industry-wide mega co-op.

Negotiating teams from the two giant companies began meeting on Wednesday and continued over the weekend as the heat was turned up with the presentation of the finalised MergeCo business plan to its establishment board on Friday.

The plan, eagerly awaited by farmers, is now in company hands, putting particular pressure on Dairy Group, which starts a series of shareholder meetings at 11 am today with a briefing of supplier representatives in Hamilton.

Another meeting will be held at Tatuanui, near Morrinsville, tonight and more follow around the country until next Monday.

Kiwi will face its farmers next week.

The five-year financial forecast will give farmers their first chance to see details of the potential earning capacity of the latest mega co-op proposal, which was trumpeted 11 months ago as a $300 million-a-year revenue booster.

But they will also want to hear that the companies can cement a merger deal, otherwise the figures will be meaningless.

Catherine Bull, the national spokeswoman for mega co-op lobby group Farmers for Control, said an initial study in 1994 looking at the gains to be made from integrating manufacturing and marketing into a single co-op found an annual benefit of $230 million.

Numerous studies and reports since had verified that.

Ms Bull said she would be very surprised if the business plan did not show a similar result, giving farmers between 20c and 30c extra per kilogram of milksolids each year.

"For the average dairy farmer with 200 cows, this equates to $15,000 extra income each year."

She calculated that the six-year delay in setting up a single company had cost more than $1.3 billion, or $90,000 a farmer, and warned that farmer patience was wearing thin.

The chairman of Dairy Farmers of NZ, Charlie Pedersen, said two farmer groups were ready to spring into action and call extraordinary company meetings if the merger talks showed signs of breaking down.

The groups, with cross-company membership, would propose that a mediator or arbitrator be used to break any deadlock.

But the Dairy Board chairman, Graham Fraser, doubted that more pressure was needed on dairy company directors already serious about trying to reach agreement.

"The timeframe is really reducing now to reach agreement on this merger, given the need to put an application in front of the Commerce Commission.

"I'm not sure any further pressure would be productive. It might relieve the frustration [but] I'm not sure it would be effective."