Merger of dairy giants imminent

By PHILIPPA STEVENSON and NZPA

The number of dairy companies is likely to be whittled down to three today, from around 500 in the 1930s.

A merger between industry giants New Zealand Dairy Group and Kiwi Dairies is expected to get their directors' blessing this afternoon.

The merger follows Kiwi's mopping-up of willing merger targets among the industry minnows.

Yesterday that took in the 81-farmer Marlborough Cheese co-op, leaving just the Westland company in the South Island and Tatua near Morrinsville resisting the consolidation juggernaut.

Just three years ago, numbers shrank to 14, and at the beginning of this year there were seven.

Sources confirmed yesterday that Dairy Group and Kiwi had finally agreed to merge after their first attempt failed nine months ago, but details of the terms were being closely guarded. Any deal will have to be put to the companies' more than 13,000 shareholders for approval.

Meanwhile, Dairy Group has gone on something of a last-minute Christmas shopping spree.

It raised its stake in Australia's biggest listed dairy company, National Foods, to 14.9 per cent and said it had agreement to purchase more shares, which would boost the holding to 18.16 per cent.

Under Australian takeover legislation a stake of 20 per cent would trigger a requirement for a full takeover bid but Dairy Group said it had no plans to do so.

The company paid $59.76 million for 7 per cent of National Foods in October, and this week spent a further $72 million on 22.1 million shares to double its shareholding.

It has also agreed to buy a further 9.23 million shares if it gets approval from Australia's Foreign Investment Review Board.

Dairy Group chairman Henry Van Der Heyden said there were no plans for a full bid for the company.

Most observers suggested the purchase would hinder rather than help Australian industry consolidation. They said the three major milk processors that dominated Australia's eastern seaboard must be reduced to two, something a transtasman alliance at this stage would not achieve.

Dairy Group is the third New Zealand group to make inroads into Australia's dairy industry. Dairy Board and Bonlac Foods directors have agreed to a joint venture, yet to go to a Bonlac shareholder vote, and Kiwi Dairies has acquired a controlling stake in Perth-based Peters and Brownes.

Dairy Group also said yesterday that it would spend $160 million on expanding its South Island Edendale and Clandeboye milk processing sites to cope with rapid growth in South Island dairy production.