Summit irons out co-op share issues

By Philippa Stevenson

The weekend's high-noon dairy company summit has resolved the thorny issue of industry shareholdings which had threatened to kill plans for a mega co-op.

After two days of often tense discussions in Auckland, about 40 directors and executives of the country's three largest dairy co-ops came up with an ownership structure for merging most companies with the Dairy Board.

A recommended share structure would be put to farmers for their consideration "within weeks, not months," Graham Calvert, chairman of the mega co-op establishment board, said yesterday.

Farmers would get the detail before the industry made its second application to the Commerce Commission, scheduled for November but now likely to be December.

"In putting together the principles for the share structure we have agreed that there will be fair entry and exit. MergeCo [the mega co-op] will own both the ingredients and consumer parts of the business and the farmer co-operative will maintain its 100 per cent ownership and control," he said.

The establishment board will meet in Wellington today (mon) to begin an agreed programme to flesh out the detail of the share structure. A key point will be share value which is fundamental to the mega co-op's capital structure.

The board would complete the work as soon as possible but expected to make little progress this week because of a heavy schedule, including the Dairy Board annual meeting.

The deadlock arose after Dairy Group favoured farmers having two types of shares, one reflecting export quota returns, and the other in a high risk consumer business.

Kiwi Dairies, along with Northland, wanted one type of share fairly reflecting the value of farmers' off-farm industry investment.

Yesterday, an insider said it had been useful that, for the first time, Kiwi and Dairy Group directors had been in the same room to outline their positions. The agreed structure would combine the best of both.

Also, key to the success of the meeting was that it was run by an independent facilitator, and was addressed by an international expert in co-operative companies, Professor Bruce Anderson of Cornell University, and experienced industry consultant Alan Jackson of the Boston Consulting Group.

Professor Anderson spelt out how similar organisations had handled issues, and the implications of specific courses of action.

Mr Calvert said company directors now had information that had brought a "realisation that the world is going to leave us behind. They've generally always been prepared to shift if you can show that it is commercially sensible to do it."

Earlier, he had revised his opposition to the mega co-op "as a result of the in-depth study that showed where we could make some money overseas.

"We are not doing this simply for merging the companies in New Zealand ... it is to give us the weight we need in the international market."

Mr Calvert said in the last 18 months international dairy trading companies had gained strength "and they really want to be able to attack New Zealand's dairy industry in the marketplace. So we are going to have to match them, and we can't let prejudices get in the way of that."