Westland board rejects Fonterra offer

By PHILIPPA STEVENSON, agricultural editor

Dairy giant Fonterra is in hot pursuit of one of the last industry minnows.

But Westland Dairy directors have recommended that their 282 suppliers reject the mega dairy company's latest offer, to the annoyance of Fonterra chairman John Roadley.

Yesterday, the head of the 14,000-shareholder Fonterra castigated Westland's board, declaring himself surprised and disappointed at the negative response to an offer made "in the interests of a united and strong New Zealand dairy industry".

Westland chairman Ian Robb struck back, suggesting Mr Roadley concentrate on running Fonterra rather than using its "size and dominance to meddle in Westland's affairs".

Mr Roadley accused the Westland board of failing to give its shareholders an opportunity to assess the offer properly before being asked to vote on it next Wednesday.

But Mr Robb said the offer was little different from the one-for-one share exchange previously soundly rejected by the company. Advisers had described that as a takeover, not a merger, he said.

Fonterra's most recent offer was received on December 30.

"We looked at it, checked it against the previous offer, [and] saw it as virtually no different," Mr Robb said.

He advised Mr Roadley that there was no point going to the West Coast for further talks, and sent the board's "no-sale" recommendation to shareholders to mull over before next Wednesday's special general meeting.

Pressing his case yesterday, Mr Roadley said there was a "unique window of opportunity" for Fonterra and Westland to merge and take advantage of special legislation that enabled Kiwi Dairies and New Zealand Dairy Group to merge and form Fonterra.

If the companies merged before March 8, they would not need Commerce Commission approval, he said.

Some Westland farmers have responded to Fonterra, calling a meeting last night in Westport that was to be addressed by Fonterra director Harry Bayliss.

John Reedy, one of two suppliers to call the meeting, said some farmers wanted to hear directly from Fonterra.

"There is a lot of interest. We are going to be asked to ratify the decision of the directors - probably one of the biggest decisions people will ever make on the Coast."

It was not a lack of trust in directors but a wish to discuss the issues further, he said. "People have just been swept along with it and we haven't really gone into it enough."

He was keen to know whether Fonterra would make further offers in the future if this one was rejected, as was likely.

With 98 per cent of the country's milk supply already secured, Fonterra has provoked questions in industry circles with the strength of its ardour for Westland.

Yesterday, one observer suggested the giant feared being benchmarked against Westland, a likely better performer in dairy farmers' traditional comparison race, the payout stakes.

Fonterra had much work to do to achieve optimum performance and could lag behind both Westland and traditional industry payout leader Tatua, the other independent company.

The commentator, who did not wish to be named, said Tatua had always been seen as innovative. "I think Fonterra shareholders would be excused for thinking 'Tatua has done it again, they've always done it'.

"Westland is a bit of a different story. They are a long way from anywhere. Ostensibly they have high transport costs, but they are starting to continually pay more than Fonterra would. I think that will cause some questions to be asked, probably unfairly because [Fonterra] has a lot of work to do."

As well, eliminating Westland as a separate company would remove one possible source of entry to New Zealand of bigger competitors to Fonterra, such as the multinationals Nestle or Danone.

Mr Robb said he had heard the speculation but was not sure why Fonterra was so keen to win over Westland, unless it was a reluctance to pay out the value of the company's shares in the Dairy Board, an estimated $84 million.

He was confident his shareholders would reject the offer.