Tension rises over mega-plan

By PHILIPPA STEVENSON

Tension in the dairy industry is reaching new heights in the lead-up to the presentation of the finalised mega co-op business plan to the establishment board on Friday.

The industry has been on tenterhooks since the latest proposal to integrate its marketing and manufacturing arms was launched last May.

It is also holding its collective breath over re-started merger talks between giant companies Kiwi Dairies and New Zealand Dairy Group.

One insider rated the chance of success from the negotiations as "50-50 and falling" following their resumption after two months of being stalled over differing asset values, earnings forecasts, share structure and culture.

Others suggested that without a decision this week the whole plan would die.

The business plan, which has undergone "stress testing" since an early version was presented to the Kiwi and Dairy Group boards in February, is a five-year forecast of earnings potential from the mega co-op.

It is said to have found the potential annual savings of $300 million a year identified in several earlier reports but, in the first year particularly, high staff redundancy costs are said to reduce that figure.

Establishment board chairman Graham Calvert, who expects to have the business plan, Budget-like, from the printer today, said a merger decision was vital by March 17.

The industry needs Commerce Commission approval for the proposal and 75 per cent farmer support by September 1, when special enabling legislation lapses.

Mr Calvert saiod he expected the plan to be endorsed by the establishment board in Wellington on Friday and immediately forwarded to dairy companies, which would take it to their shareholders.

Delays to the report have caused Dairy Group to postpone a round of supplier meetings originally scheduled to begin tomorrow. They will now begin in Tatuanui, near Morrinsville, next Monday. Kiwi will begin consultation after its next board meeting on March 22.

Mr Calvert said a formal vote could be taken only on a merger proposal, but he expected farmers to indicate their views at the meetings.

"I'm sure we will get the support," he said.

Meanwhile, a frontrunner to lead the mega co-op, former Northland chairman and now Kiwi director Greg Gent, said a month at a major business school in France had "crystallised my views on some things."

The establishment board member and long-time, ardent mega co-op supporter has always pitched for a "new company, new culture."

Hours after returning from the Institute of Business Administration near Paris, he said his studies had confirmed for him that the mega co-op "was only the best structure if it is set up appropriately ... That is obviously critical."

In his absence, Kiwi directors nominated Mr Gent to replace Kiwi chairman John Young on the Dairy Board after Mr Young announced his retirement from the position two weeks ago.

The move was seen as preparing the way for Mr Gent to pitch for the mega co-op top job, but he declined to comment.

"We've got to agree a lot of things before we agree the detail of governance of the mega co-op," he said. "That would be absolutely speculative."