Mavericks talk to GlobalCo on merger

By PHILIPPA STEVENSON agricultural editor

Global Dairy Company is making overtures to the only two dairy cooperatives not committed to a single New Zealand company to join the proposed merger.

GlobalCo, the company proposed to be formed with the amalgamation between the Dairy Board, New Zealand Dairy Group and Kiwi Dairies, has had talks with Waikato-based Tatua and the Westland Co-op about the proposal.

The two small but very profitable companies produce about 2 per cent of the country's milk, compared to the 98 per cent expected to be supplied to the new company. Until now, Tatua has been strongly opposed to joining GlobalCo, while Westland has taken a softer stance.

Tatua chairman Alan Frampton said his company would continue discussions with GlobalCo "as long as they seem to be fruitful."

"There is a case to be made to continue as much cooperative activity as we can, but if that can't be negotiated we will go our separate ways, I guess."

Dr Frampton said the talks did not indicate a softening of Tatua's independent stance.

"It makes a lot of sense [to talk]. It is not a case of considering offers but of seeing whether we can't develop a sensible working relationship."

Westland chairman Ian Robb could not be contacted for comment.

GlobalCo project director Graham Stuart, in Hokitika on Friday to talk to Westland directors, said the two firms might have a different view on the way forward "but we want to give them the option [of joining]."

It was too soon to have had a response from the firms, he said.

"We're in the very preliminary stages of dialogue with them. We've been together in the industry for a long time; so we're not strangers to each other, [we] understand each other's commercial objectives, and we're on good talking terms."

Explaining the reasons for the bid, he said Agriculture Minister Jim Sutton had made it clear that any arrangements for dairy industry restructuring had to fairly treat the minority companies.

Meanwhile, directors attending GlobalCo's first board meeting last week began work on the new company's constitution and capital structure, Mr Stuart said.

"They realise we have a lot to do in a short time, so they've rolled their sleeves up."

The joint working party of industry and Government officials had met three times and made good progress. There had also been "technical meetings."

Officials continued to express concern about whether the new company could be established by June 1, echoing the concerns of Mr Sutton. But Mr Stuart said he was confident the work of addressing the four issues raised by the minister would be completed by mid-March.

"Nobody's walking away from it yet, and we're still reasonably confident we're on target."

The four issues are industry contestability, the unbundling of market returns from milk supply payment, fair entry and exit for suppliers, and the future administration of tariff quota access.

In an address to Federated Farmers Dairy Farmers on Thursday, Mr Sutton gave his thoughts on GlobalCo's plan to sidestep the Commerce Commission.

The industry has argued that the commission's focus on competition on the domestic scene made it inappropriate to judge a company which would be mostly export-focused.

"Some have suggested that this industry is too important, too unique, to be put to the trouble of meeting the objectives of Commerce Commission scrutiny. The opposite is the truth," Mr Sutton said.

"This industry, above almost all others, must be required to meet those standards, because if it does not, the damage to the interests of every New Zealander is potentially too great."

He said some commercial law experts believed the proposal, with necessary fine-tuning, could pass commission scrutiny, but the process would take two years.

The Government would "try to meet similarly rigorous, though made-to-measure, rather than off-the-peg, standards in a lot less time than that," Mr Sutton said.

Mr Stuart said it was too early in the consultation process to judge whether the minister had reached a conclusion on the commission.

"We've never actually said this is a slam-dunk. We've expressed our view and we know there are people with different views, but what the minister is going to see is a response to the four questions, and make his call," he said.

"What he has said at different times, as has the Prime Minister, is that they have some sympathy for our view."

Mr Stuart said GlobalCo believed if the minister got satisfactory answers on the issues of concern to the Government "he won't be requiring us to go to the Commerce Commission."

Mr Sutton has also questioned whether it is fair that sharemilkers could not be GlobalCo shareholders.

Mr Stuart said GlobalCo would have difficultly advocating for sharemilkers' stockholdings when a recent vote by Dairy Group shareholders had rejected the proposition.fuweb

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