Ports kept waiting on Fonterra deal

Rival port companies in Auckland and Tauranga will have to wait a little longer for a decision on who gets the lucrative contract to ship most of Fonterra's dairy exports.

The latest delay, which follows two months of speculation over the fate of the contract, is the result of a merger planned between global shipping giants Maersk Sealand and P&O Nedlloyd.

Fonterra logistics general manager Nigel Jones said: "It wouldn't take a lot to conclude the potential for a lot of synergies and efficiencies are to be had from a merger such as this."

Analysts said P&O was likely to put on the backburner a decision on what port would be the main hub for its Asian and European services.

Market favourite to clinch the Fonterra business is Port of Tauranga, which saw its share price slump 30c to $4.55 yesterday on the back of the merger announcement. Ports of Auckland shares rose 1c to $7.91.

Danish Maersk, the world's biggest shipping line, yesterday confirmed it was making a cash offer for P&O Nedlloyd, the fourth-biggest shipping line.

The proposed $4 billion takeover will be recommended to shareholders by the P&O Nedlloyd board. P&O, which owns 25 per cent of the shipping line, also said it would accept the offer.

The takeover will result in a shipping mammoth with a capacity in excess of 1.3 million container units.

Fonterra, with annual revenue of $12 billion, is New Zealand's biggest business. It repeated yesterday that it spends "hundreds of millions" of dollars a year on ocean freight.

The two shipping companies carry about 80 per cent of Fonterra's international ocean freight between them.

Jones said the relationship between the three parties was "mature" enough to suggest Fonterra would not be squeezed by the reduced competition.

Analysts had forecast that Ports of Auckland stood to lose up to 20 per cent of its P&O Nedlloyd container business if Tauranga won the bulk of the Fonterra trade.

One analyst said yesterday that the decision might be delayed but Tauranga would still win the bulk of Fonterra's business.

An industry insider said Ports of Auckland was "cock-a-hoop" about the merger announcement because it had delayed the P&O Nedlloyd/Fonterra decision, but that celebration could be premature.

A Ports of Auckland spokeswoman said the company did not discuss its customers.

Tauranga port chief executive Jon Mayson said it was too early to comment.

Market opinion on the effects of the merger was split.

An industry insider said it could result in better service, cheaper prices and a rationalisation of New Zealand ports.

But an analyst said the notion that service and prices would improve was naive.