Kiwi's offer trumps Dairy Group merger

By Philippa Stevenson

New Zealand Dairy Group directors yesterday saw a narrow vote for an inter-island merger proposal immediately trumped by an offer for a nationwide co-operative.

At a meeting in Hamilton, 2000 of Dairy Group's 6800 shareholders turned up in
person and 3000 cast proxy votes on the proposal to merge with the South Island Dairy Co-op (Sidco) to create a company with 58 per cent of the industry.

A required 75 per cent of votes was only just exceeded by 3 per cent to give the merger the go-ahead after disgruntled farmers questioned what they would get from the deal short term, and whether it would deliver promised major benefits long term.

Sidco suppliers are to vote today on the plan, which had been pitched as a way to create a heavyweight company to act as a catalyst for further unification of the industry.

But before Dairy Group suppliers had put away their pens, another major company, Taranaki's Kiwi, had taken the initiative and called for a mega co-op to be set up within months.

The move will re-assure farmers who feared that Kiwi would go it alone, or form alliances with foreign companies, and has put the heat on a Dairy Group board divided on the mega co-op idea.

Kiwi chairman John Young said his company believed "the formation of a new mega co-op embracing all existing co-ops is in the best interests of farmers provided it is implemented with urgency and in a manner all farmers can support."

Mr Young said Kiwi made the decision at its March meeting and approached the major companies with a view to forming such a company by June 1, the start of the 1999/2000 dairy season.

"To date the response from these companies has been positive and we now await a definitive response from Dairy Group, who are still considering their position," he said.

Dairy Group chairman Doug Leeder was unavailable for comment on Kiwi's plan but was questioned at the meeting on a rapid move to a mega co-op.

He said it would be an "exceedingly difficult task" to quickly merge nine companies with different performances, balance sheet strengths and culture.
But Kiwi chief executive Craig Norgate said company differences need not hinder a mega-merger. "Most of those are red herrings. There are pretty standard commercial approaches to resolving those issues," he said.

"We're not saying it [a mega co-op] is the best thing since sliced bread but there is no right answer. On balance, if we can put it together quickly we'll support it."

Mr Norgate said Kiwi did not state its position before yesterday's meeting to avoid upsetting a close vote.

"We've tried to move on past that. What farmers want is vision and leadership. Let's get to the future fast."

He said progress would now hinge largely on Dairy Group.
"They first need to decide that's what they want."