Kiwi scorns call for mega co-op mediator

By PHILIPPA STEVENSON

Dairy Board chief Warren Larsen has called for an international arbitrator to get some speed into the bogged talk to merge the country's two big dairy companies into one mega co-op.

"We really need to push ahead to get the coordinated effort and maximum clout we will get from the integration of the manufacturing and marketing here in New Zealand. That's what MergeCo is all about, that's what everybody has to focus on," Mr Larsen said There was limited time available to bring NZ Dairy Group and Kiwi Dairies together because other international companies were "not sitting there waiting, and for that reason everybody has to put as much energy as they can into bringing it together."

Mr Larsen said it was difficult for the company leaders to balance their responsibilities to shareholders with that of the whole industry "but the prize is so big it dwarfs other investment in New Zealand. If you look at New Zealand from the other side of the world the answers are immediate.

The mega co-op would become New Zealand's main dairy exporter with sales of $7 billion.

"I don't think any of the alternative options that are available come any where close to giving what has been identified from the integration," Mr Larsen said.

After undertaking due diligence since May, long-time rivals Dairy Group and Kiwi have now tabled their assessments of each company's value. After years of oneupmanship, however, directors are now caught with having to justify figures to farmers who, from past rhetoric, may have an inflated idea of their company's worth.

An unwillingness to compromise, and the political risk of being seen to be offering a "soft" deal, is thought to be holding up a deal.

Mr Larsen said that one way through the impasse could be to bring in an international arbitrator whose expertise from brokering similar deals would be respected by both parties.

An arbitrator was used in the merging of four US cooperatives into the new Dairy Farmers of America company, he said.

Mr Larsen declined to name possible arbitrators until they had been contacted to determine willingness or availability.

But Kiwi chief executive Craig Norgate dismissed Mr Larsen's comments saying: "We don't need helpful suggestions at this stage. We have enough people trying to poke their noses in.

"We've got a facilitator. It's not an issue of arbitration and frankly Warren has no business commenting."

Mr Norgate said the companies had only just started talking about valuations and it was premature to consider arbitration. If they were still apart when current talks had finished "then obviously we have to look at those options."

Meanwhile, at the annual Trade New Zealand-sponsored export awards last night, the Dairy Board was named exporter of the year. It also beat Telecom's international division to win the major exporter award for annual foreign exchange earnings of more than $75 million.

"It's a great result and a wonderful accolade for the 9500 staff who work for the board around the world," Mr Larsen said.