Dairy chiefs accuse rivals of petulance

By PHILIPPA STEVENSON

Dairy Group's merger-busting move against rivals Kiwi Dairies and Northland has been branded political petulance which is destined to backfire.

On the eve of today's vote by Kiwi shareholders on a takeover of Northland, Dairy Group warned that the "curtain-raiser" merger would seriously prejudice the industry's mega co-op game plan.

The call was repeated by Dairy Group director John Roadley, the former chairman of South Island Dairy Co.

Yesterday, Northland chairman Greg Gent labelled the outburst "political petulance" and said it had ignited enough parochialism in Northland and Taranaki to ensure the merger went ahead.

"Northland has always been very committed to the mega co-op - long before it was fashionable - and that is still our objective, as I believe it is Kiwi's," Mr Gent said.

Kiwi chief executive Craig Norgate said the two companies had always maintained their merger was in the industry's interest.

"We just wouldn't be doing it unless it was entirely consistent with putting the whole industry together," he said.

Mr Gent rejected the claim by Dairy Group chairman Henry Van Der Heyden that an $112.5 million payout by Kiwi to its shareholders, funded by borrowing, would weaken the equity ratio of the proposed mega co-op.

"We are setting up a company [mega co-op] with turnover of $7 billion. If it can't stand $112 million worth of debt, it shouldn't be in existence."

Mr Gent said it had also cost Dairy Group to merge with the South Island Dairy Co-op earlier this year and had "created a huge transfer of wealth from the Waikato to the South Island" because of the southern region's potential for milk supply growth. It will require investment in factories to process the new supply.

"It has affected their underlying earnings and somehow they have got to explain that to their Waikato farmers," he said.

Last season Dairy Group modestly outperformed Kiwi. This season the reverse was likely to happen. "That tells me the companies are very equal. The rest is projections forward and we know what can happen with projections," Mr Gent said.

Debt levels were not holding up the mega-merger but conflicting philosophies were.

Kiwi and Northland were cooperatively-minded, while many on the Dairy Group board, including Mr Van Der Heyden and mega co-op establishment board chairman Graham Calvert, had once been opposed to a one-company idea, he said. "They have now had to put another dress on and I guess they are finding it difficult to wear."

Mr Gent condemned the lack of independence shown by Mr Calvert in also questioning the Northland-Kiwi merger.

Mr Calvert was supposed to have taken leave of absence from the Dairy Group board to chair the establishment board and it was regarded by Kiwi and Northland as a "huge breach of faith" that he had not.

Despite the public rowing, he said it was inevitable the mega co-op would be formed, but "I know where the parties are and for it to happen this year they have to move a long way."

Kiwi suppliers vote on the merger today, and Northland shareholders tomorrow.