Sidco go-ahead may be too late for Kiwi

By Philippa Stevenson

The Commerce Commission, in an about-face, has guardedly authorised a Kiwi Dairy Company takeover plan for the South Island Dairy Co-op (Sidco) - a company whose directors have already spurned the bid.

Sidco instead has chosen to pursue a merger with Hamilton-based New Zealand Dairy Group to form a heavyweight expected to chart a new course for the industry.

Only last month, the commission declined to clear Kiwi's acquisition of Sidco because of dominance concerns but in its draft determination, released yesterday, it found that expected public benefits of the merger outweighed its detriments.

The decision has heartened Kiwi but the move is likely to be too late to salvage its bid for Sidco, whose shareholders vote in two weeks on the Dairy Group proposal. The commission will not give its final decision on Kiwi's offer until May 26.

However, Kiwi chairman John Young said the determination was a positive step toward sensible evolution of the dairy industry.

"As an independent, statutory body, the commission has seen fit to highlight the economic advantages of the proposal from Kiwi and clearly we find that pleasing.

The progress thus far certainly vindicates our move to seek authorisation," he said.

In a 54-page decision, commission deputy chairman Mark Berry said, on the information available, the estimate of benefits from the Kiwi-Sidco merger were between about $6.3 million a year to $8.4 million a year depending on circumstances.

But Sidco chief executive John Roberts said the benefits from the Dairy Group/Sidco merger were "different but better, or as good as."

"Both companies put up very good bids. We would have been more than happy with both but we chose the New Zealand Dairy Group for the bigger picture of the dairy industry."

Mr Roberts said Sidco directors favoured a mega-coop which embraced 90 per cent of the dairy industry, including Kiwi.

The size was essential for the industry to compete in the world dairy market, he said.

In a document sent to Sidco and Dairy Group shareholders this week, the companies say their merger "has been put together on the basis of long term security and improvements in payout."

In addition to leading the way in the creation of a mega-co-operative "the merger will deliver operational gains of up to $7 million after four years," the companies claimed.

In its determination the commission acknowledged that the industry was in a period of substantial change and there were issues on which it lacked information.

Interested parties now have until April 13 to make submissions on the draft determination and experts employed by the interested parties have until April 20 to make their submissions.

A conference would be held on May 5 and 6 before the commission gave its final decision.