By PHILIPPA STEVENSON agricultural editor
A binding valuation of the would-be merged companies New Zealand Dairy Group and Kiwi Dairies has declared them to be a matched pair.
The independent financial judgment by international consultancy Arthur Andersen is crucial to the companies' proposed merger.
An earlier attempt failed after they disagreed over
their relative worth.
The company chairmen, Kiwi's Greg Gent and Dairy Group's Henry Van Der Heyden, welcomed the comparable values as a major step forward for the formation of the tentatively named Global Dairy Co.
It would eliminate the need for one company to make cash payments to the shareholders of the other, they said.
But the finding, mailed to around 14,000 shareholders yesterday, is likely to raise the ire of some farmers in each camp.
Not only have both companies had a history of talking up their worth in relation to each other but some North Island Dairy Group suppliers still feel they got a poor deal when their firm merged with the South Island Dairy Co over a year ago.
However, one Waikato farmer said many others suspected that the companies already had the valuations in hand when they announced the merger deal last month. He believed there would be little anger. "Most farmers just want a clean deal and let's get on with it."
Arthur Andersen found little to separate the two companies, which were valued excluding their investment in the Dairy Board. The outcome was unsurprising given that each faced strong incentives to monitor and respond to the strategies of the other, the consultants said.
Under instructions from the companies, two approaches were taken to the valuation process - capitalised earnings before interest, tax, depreciation and amortisation, and limited discounted cashflow.
Under one scenario, Dairy Group was worth 5c a kilogram of milksolids, or 1c a share, more than Kiwi. Under the other, Kiwi was valued at 4c a kilogram of milksolids, or 3c a share, more than Dairy Group.
Neither valuation triggered the 20c a kilogram level which under the agreement would have required one company to pay the other's shareholders.
Shareholder meetings to discuss the merger start next week.
