No time for delay on way to co-op

By Rod Oram

Between the lines

"Move quickly to one national co-op" was the clear message yesterday from many farmer-owners of New Zealand Dairy Group. They voted for a merger with South Island Dairy Co-op but many made it plain from the floor that they were bothered by the time and cost of such bi-lateral deals.

They want their company's board to cut to the chase and get on with forming one big co-op to take on the world.

The most constructive response to the Dairy Group farmers came not from their own board but from the board of Kiwi Co-op Dairies with its announcement it wanted to merge with the enlarged Dairy Group/Sidco.

Kiwi's re-commitment to a united industry was impeccably timed. By speaking up so soon, it gained a tactical advantage by wrong footing Dairy Group/Sidco, an entity more than twice its size.

Although Doug Leeder, Dairy Group's chairman, and other members of his board have talked in broad concept of merging with Kiwi if a fair and transparent deal could be thrashed out, their actions have yet to match their words.

Dairy Group remained silent after Kiwi made its announcement late yesterday afternoon. Board divisions are one reason. Some directors do not want to take the next step of bringing Kiwi into the fold. Rather, they would try to lead the industry with the 58 per cent of the nation's milk supply the merger with Sidco gives them. If they hope that will mean they can avoid Commerce Commission scrutiny of the deal, they are mistaken. The Commission has asked for public responses to questions which go right to the heart of the industry's restructuring.

If they hope to stall Kiwi while they bed down the Sidco deal so they have more power when they finally negotiate, they are mistaken again. With its announcement yesterday, Kiwi in effect has demanded to negotiate a merger, as is its right under the joint venture agreement it negotiated with Dairy Group last June.

That heads of agreement was the first step towards the two jointly owning a deregulated Dairy Board. Crucially one clause called for a merger of the two big co-ops if they decided a joint venture would not work.

Delay on forming one big co-op would be a great mistake. Speed is particularly critical in the political arena. A raft of competition and deregulation issues have to be sorted out. The industry will find a minority National government this side of an election a much more amenable negotiation partner than either a National or Labour government the other side.

Events will move on today when Sidco's farmers express their support for one national co-op even as they vote on the Dairy Group merger. Today would be a fine day for the Dairy Group board to join the chorus too.