Decision day for $12bn merger

By ANNE BESTON

The shape of New Zealand's richest export industry hinges on a finely balanced vote by the nation's 14,000 dairy farmers today.

Proponents of the mega-merger of the largest processing companies were cautiously confident yesterday of winning the needed 75 per cent approval, but with little to spare. Their telephone surveys suggest support is running at 76 per cent.

The dairy industry, accounting for 20 per cent of the country's exports, is facing its greatest change since the Dairy Board was set up nearly 80 years ago.

After weeks of intensive lobbying, dairy farmers will be asked to approve the merger of Hamilton-based New Zealand Dairy Group and Taranaki's Kiwi Cooperative Dairies to create a $12.5 billion giant, GlobalCo.

It would be the biggest merger in New Zealand's history and create its largest company - twice the size of Telecom. The farmers' decision could be fateful for the whole economy. GlobalCo would process and market 95 per cent of the output of the industry that earns more export dollars than any other, accounting for fully 7 per cent of New Zealand's GDP.

Meetings will be held around the country and the result should be known by early to mid-afternoon.

If the merger is approved, the Dairy Board will become GlobalCo's marketing arm and lose its statutory monopoly as sole international exporter of our dairy products.

GlobalCo would become the world's ninth-largest dairy trader. Its chairman John Roadley warned farmers that this could be their last chance - "The Government's view is that it has invested a huge amount of time and energy into this merger. It won't do it again."

Today's decision would be momentous. "I'm feeling very positive. The time is right and I'm confident we'll have a significant margin."

But opponents of the merger, spearheaded by the Farmers for a Better Dairy Deal group, say the giant dairy company could become "fat and lazy," holding retailers, consumers and farmers to ransom by controlling milk supply.

Member Hilary Webber said farmers would be better off leaving the two companies in competition.

In the domestic market, New Zealand Dairy Group mainly trades under the Anchor brand, while Kiwi uses the Mainland brand. The Dairy Board decides how New Zealand products are marketed abroad.

Dairy farmers will begin arriving at meetings in Matamata, Hawera, Ashburton and Invercargill this morning.

Mr Roadley said phone surveys of dairy farmers showed support was above the necessary 75 per cent threshold - "but possibly only just," with 76 per cent in favour.

Both sides could seek a recount if the vote is close.

Last-minute manoeuvring almost delayed the vote after Farmers for a Better Dairy Deal distributed a proxy voting form allowing farmers to change their vote. New Zealand Dairy Group said the form was not valid and would not be counted.

Farmers for a Better Dairy Deal member Tony Baldwin said that, after a series of meetings, the two sides resolved the dispute and all votes would be counted.

But a Dairy Group spokesman said the company reserved the right to challenge votes on the alternative form if they had "a material impact" on the decision.