Merger urged 'for the good of farmers'

By PHILIPPA STEVENSON

The country's most successful dairy company is urging the battling industry heavyweights to merge and put an end to debilitating uncertainty.

Alan Frampton, the chairman of the industry's highest payer, Tatua, has called on New Zealand Dairy Group and Kiwi Dairies to put their differences aside and stitch a deal together for the good of 14,000 dairy farmers.

Tatua would stay out of the mega co-op but strongly supported it as the inevitable result of years of industry mergers and takeovers, Dr Frampton said.

"Given everything that has gone before, this [merger] is just the final step in a process," he said.

Dr Frampton said a history of conflict between the big players, including Dairy Group's takeover of South Island Dairy under the nose of Kiwi and Kiwi's snaffling of Northland, was likely to have led to the current deadlock.

"All those issues create tensions, perhaps cloud some of the current issues, and are very difficult to deal with in a short time."

The uncertainty was causing problems for Tatua, which conducted two-thirds of its export business through the Dairy Board, Dr Frampton said.

If the merger takes place, the industry will deregulate on September 1.

Tatua would then be on its own, although it wants to still use the board's marketing network.

"If [deregulation] is delayed, it makes the situation more difficult to handle because we don't quite know when we will have to do everything for ourselves," Dr Frampton said.

Tatua was maintaining an association with board agencies around the world but could not form contracts with them.

It was putting in computer software to handle export documentation but could not operate it until it controlled its own business.

"Customers, too, are wanting to know whether we will be working through the Dairy Board, dealing with them directly and those kind of things," Dr Frampton said.

Meanwhile, some of the country's most progressive farmers have come out in support of the mega co-op.

Ted Rollinson, chairman of last week's Large Herds Conference in Christchurch, said farmers attending the group's annual meeting had overwhelmingly voted to write to Kiwi and Dairy Group expressing support for MergeCo.

The 1200-member Holstein-Friesian Association has condemned the indecision of the two companies as "diabolical."

"Diabolical because it has taken months of time and millions of dollars for the executives and chairmen to come up with a no-result," said association chief executive Phil Beatson.

"They have further opened the door for the international wolves.

"They haven't the gumption to mothball the mega-merger, and they haven't the ability to come up with a firm recommendation about the best structure for the future."

Mr Beatson said farmers felt they had benefited little from past industry restructuring and were cynical about what more it could offer.

Calculations by the association showed that farmers' returns against total Dairy Board revenue had slumped from 56 per cent four years ago to 37 per cent and 39 per cent in the past two seasons.

If farmers got to vote on the merger they could turn it down for lack of confidence in the ability of current industry players to deliver sufficient per unit returns to sustain their operations.

Mr Beatson said that could be disastrous for farmers and New Zealand in the long term. Shareholders needed more information before making a decision.