Talks through night on impasse

By PHILIPPA STEVENSON

Only an overnight miracle will stop the axe falling on the dairy industry mega cooperative today.

Late yesterday, establishment board chairman Graham Calvert said he expected talks to continue through the night on the near-extinct merger proposal between warring companies New Zealand Dairy Group and Kiwi Dairies.

But after the months of negotiations he held little hope of good news this morning.

The companies were giving little away yesterday. A Kiwi spokeswoman said there had been no response to the company's offer of binding arbitration on the deal and it had not thought past that position.

"We're waiting to see what happens."

Dairy Group has described the offer as unworkable and a spokesman said it had widened the gap between the companies, which have disagreed on their relative valuations.

The company saw the offer as Kiwi retreating from its willingness to go into a merger with no money changing hands. Dairy Group believes its farmers should be better off by about $212 million.

Mr Calvert said he understood letters were exchanged between the companies yesterday but no indication was given that he should not pull the plug on his board today.

On Wednesday, Mr Calvert said if the companies had no agreement by this afternoon, he would recommend the board cease work on the application to the Commerce Commission and be wound up.

Dairy Farmers of New Zealand chairman Charlie Pedersen, who remains optimistic farmers' overwhelming desire for a mega co-op will be achieved, said his organisation had written to the board urging it to continue work on the application.

It had also written to all dairy company chairmen asking them to put fresh impetus into forming the mega co-op.

Mr Pedersen rejected Dairy Group's pessimistic view of the arbitration offer and questioned what it had to lose by accepting it.

"This is the best deal New Zealand dairy farmers have had in 50 years since the single-seller legislation paved the way for today's industry. It behoves directors to do everything they can and I would be disappointed at the lack of magnanimity," he said.

Mr Calvert said it would be irresponsible for the establishment board to continue past today if there was no merger agreement, even if the Government extended the September 1 deadline on the industry's special enabling legislation.

"There is nothing new. If they can't agree now, they're not going to agree in one week or two weeks," he said "It's enormously expensive and we are spending farmers' money and when the companies can't agree, it all falls over. I don't believe that is a responsible approach to it."

The mega co-op was expected to turn the $8 billion industry into a $30 billion one in 10 years. The aim has been to position it to become one of the top three global players by forming alliances with overseas companies which would give it access to the 95 per cent of the world dairy market available only to domestic operations.

New Zealand is now operating in the 5 per cent of the market which is internationally traded.

The establishment board identified annual cost savings of $306 million from the integration of the industry's manufacturing and marketing arms, giving the average farmer an extra $12,000.