Nerves, delay in co-op

By PHILIPPA STEVENSON

One self-imposed deadline on the dairy industry mega co-op plan has been postponed for two months, while tension is rocketing only days out from another.

Yesterday, MergeCo establishment board chairman Graham Calvert said an application to merge up to eight processing companies with the exporting Dairy Board would not go to the Commerce Commission before February.

In October, Mr Calvert expected to apply by December and receive an answer in March or April.

Talks had been held with the commission and the delay was to ensure the application satisfied all its requirements, which would make for a speedier decision, he said.

Though tight, the timetable of a June 1 new dairy season start for MergeCo could still be met. It would also be before the September 1 demise of enabling legislation, Mr Calvert said.

Meanwhile, the industry is on tenterhooks as a decision on the crucial merger between Kiwi Dairies and Dairy Group draws closer.

The amalgamation of the two companies, whose combined assets total more than $3.2 billion, would be the biggest merger in New Zealand history.

It would also kickstart the plan to integrate processors with their marketer - a combination forecast to transform the $7 billion industry into a $40 billion one in 10 years.

Twelve days ago, Kiwi chairman John Young and his Dairy Group equivalent, Henry Van Der Heyden, gave themselves up to three weeks to reach "an agreed position" on the merger.

It is understood the absolute deadline is Friday week, and that the vague term disguises an intention to announce whether the two will be able to merge, not the terms.

Both companies have fallback positions, Kiwi's known as Plan B, Dairy Group's as Operation Eagle.

Kiwi, which hopes to backdate a merger with the Northland company to June 1 if shareholders support it this month, is believed to want a transtasman partner.

Dairy Group's plan is said to have the name of a predatory bird because it includes picking off as many Kiwi and Northland suppliers as possible to add to the company's already huge supplier base of 58 per cent industry share.

The move would seriously weaken Kiwi, either so much that it could be simply taken over, or that it would have a vastly reduced shareholding in the Dairy Board.

Dairy Group, which would incorporate the board as its marketing arm, would then have to recompense Kiwi less for its board shares.

The Dairy Farmers of NZ chairman, Charlie Pedersen, described Operation Eagle as the "dumbest" plan but understood it had been born out of frustration.

He said the industry would have to be deregulated and a weakened Kiwi could look to another company to bail it out, costing the rest of the industry the premium Whareroa manufacturing site and bolstering a competitor.

"It's basically cutting off your nose to spite your face."

Mr Pedersen said he was heartened by statements from Labour agriculture spokesman Jim Sutton that the Dairy Industry Restructuring Act, which enables the mega co-op to form, could be amended. That might take some pressure off the industry.