By Geoff Senescall

Kiwi Co-op Dairies has muscled its way into merger talks with the South Island Dairy Co-op.

It is expected to put in an offer for the Christchurch-based dairy group within the next 10 days to rival a bid already on the table by New Zealand Dairy Group.

South Island Dairy Co-op chairman John Roadley said yesterday that the door was opened to Kiwi after it stated an intention to lodge a counter offer to shareholders regardless.

"So it seemed a logical move by our board to go direct to Kiwi and say if that is your intention then why don't you put in an alternative offer to us now," he said.

That way the board could "totally analyse it and make the best recommendations to shareholders."

Kiwi's pitch comes after the South Island Dairy Co-op board had already decided to recommend the New Zealand Dairy Group offer to its shareholders at an extraordinary meeting set down for February.

Mr Roadley said it was likely the meeting would now be delayed while the Kiwi offer was reviewed.

"If it looks like a truly competitive bid then our board will do due diligence on Kiwi to ensure that we are comparing apples with apples relative to both the bids. Then we will decide which of the two bids we will recommend."

Mr Roadley said he wanted the merger with the successful party to be in place in time for the start of the new season on June 1.

The chairman of New Zealand Dairy Group, Doug Leeder, expressed disappointment about Kiwi's actions.

When South Island Dairy Co-op was looking to merge with a larger player it canvassed all options in choosing New Zealand Dairy Group, including assessing linking with Kiwi Dairies, he said.

"We then went through an agreed process and the consequence was that both boards recommended that we should look at putting both entities together.

"The factor I am disappointed in is that two co-operative dairy companies, operating under the legislation that we have, are seen to be entering into a bidding process for a third co-operative."

Mr Leeder said that New Zealand Dairy Group, with around 48 per cent share of the local dairy industry, was still committed to merging with South Island Dairy Co-op., which had around 12 per cent

It also remained committed to the joint-venture arrangement with Kiwi, with around 28 per cent market share, put in place last year. However, Mr Leeder believed that all shareholders might question the commitment to the joint venture in light of these events.

The aim of the joint venture is to put together a cohesive group, representing a minimum of 90 per cent of the New Zealand dairy industry, to sell produce overseas using the Dairy Board, or its successor, as a marketing vehicle.