By SIMON HENDERY and NZPA
Domestic dairy processor Dairy Foods - a key cog in the mega-merger wheel - has voiced concerns over details of the planned merger.
In a letter to farmer suppliers who collectively own half the company, Dairy Foods chairman John Storey said that although he did not
question the benefits of the proposed merger, the framework for establishing the giant Global Dairy Company "contains anti-competitive ramifications and will have negative effects not only for domestic consumers but also ... for you as a shareholder in NZDF."
New Zealand Dairy Group, the biggest manufacturer in the mega-merger, owns the other 50 per cent of Dairy Foods. Under the mega-merger plan, Dairy Group would sell its stake in Dairy Foods.
Dairy Foods, which produces milk, butter and cheese under the Anchor brand, has been held out by the industry as capable of providing fair competition for the Mainland Products domestic company retained by GlobalCo.
But Dairy Foods fears it will be dependent, at least initially, on milk supplied by the mega-cooperative.
"GlobalCo will be the keeper of all the information and will control the milk supply," said Dairy Foods chief executive Peter McClure. "It does not give us confidence of a free market when it is totally controlled."
The Commerce Commission would have surveillance of GlobalCo after the merger, but this arrangement assumed a "liquid, fluid market, when we haven't got that," Mr McClure said.
GlobalCo project director Graham Stuart said Dairy Foods' concerns were addressed in the regulations surrounding the deal.
"Global Dairy and the Government have committed to supporting strong competition in the New Zealand domestic market by supplying milk at competitive prices to not only NZDF, but also to new entrants," he said.
"The Government's regulatory package includes very strong protections for New Zealand Dairy Foods and other competitors."
