By PHILLIPA STEVENSON
National Foods has told the Commerce Commission that its "passive" Fonterra shareholder should not hinder its bid for New Zealand Dairy Foods.
The listed Australian dairy giant is one of at least five bidders for Dairy Foods, the domestic milk company half-owned by Fonterra which the mega co-op must
sell under its establishment terms.
In an application to the commission, National Foods said Fonterra's 18 per cent shareholding in National Foods had been "essentially a passive one".
Fonterra had not even taken up its entitlement to new shares under the National Foods dividend reinvestment plan.
National Foods said it aimed to acquire up to 100 per cent of Dairy Foods, whose other shareholders are about 6200 current and former Fonterra farmer shareholders.
Many of the farmer shareholders are making their own bid for Dairy Foods through their company, the Great Milk Company.
National Foods said its wholly owned New Zealand subsidiary, National Foods International Fine Foods, would buy Dairy Foods.
The $30 million company, which has a factory in Palmerston North and employs 51 people nationwide, is a manufacturer, distributor and marketer of yoghurts and dairy desserts.
National Foods, floated in 1991 after the amalgamation of several dairy and food-related businesses, is Australia's largest and only national fresh milk processor. It has an annual turnover of about $1.25 billion.
Dairy Foods has a turnover of about $420 million and a workforce of about 850.
National Foods argued that Fonterra could not substantially influence its activities or get confidential information through its 18 per cent holding.
The New Zealand company ranked equally with all other shareholders, and National Foods board and management would act in the interests of the company and all shareholders generally.
Fonterra's shareholding did not entitle it to board seats under National Foods constitution, and at its present level of shareholding Fonterra could not influence decisions.
Even if it did get a seat, the board had little influence over operational decisions.
National Foods told the commission it would be beneficial to retailers and consumers if Fonterra was constrained "by the presence of at least one strong, expert and viable domestic competitor across a substantial range of products."
