The proposed mega merger between NZ Dairy Group (NZDG), Kiwi Co-operative Dairies and the NZ Dairy Board (NZDB) was attacked at the eleventh hour yesterday, as a consortium of eight dairy farmers and seven professionals launched a campaign to derail the deal. The GEA Better Dairy Deal LE group believes that an alternative industry structure will prove more beneficial for the farmers, and has set up a website and posted out documents expounding its views.
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Only last week, the directors of the two major dairy cooperatives in the deal announced that their 14,500 farmer shareholders have agreed to vote in favour of creating the Global Dairy Company on 18 June. The deal, which will create a giant with complete sector monopoly, has been exempt from Commerce Commission scrutiny by the government, but still needs the support of at least 75% of the companies’ shareholders.
Hoping to win the support of at least 25% however, the campaigners cite several shortcomings of the merger’s plans. Firstly, they argues that it is too risky, as to deliver the goods it requires around NZ$4bn in developmental capital. Furthermore, there is a six-year wait before potential competitors can enjoy the same access to the quota market as the Global Company and in the meantime there are no guarantees that the giant’s performance will maximise market returns for farmers.
It maintains that there is a preferential option in the report by McKinsey and Co, which would basically see both processing companies remaining as competing companies while the NZDB continues to market commodities and basic ingredients. Value-added and consumer dairy products would meanwhile be marketed by a new company, whose shares would be held by the NZDG and Kiwi Farmers.
The GEA Better Dairy Deal LE is fronted by Mark Masters, ex-president of Dairy Farmers of New Zealand, who called the bypassing of the Commerce Commission a disgusting abuse of correct practice. He is joined by Malcolm Bailey, ex-president of Federated Farmers, and Hilary Webber, ex-director of NZDG. Support has also been offered by Infometrics economist Gareth Morgan, accountant David Russell, Tony Baldwin, leader of the 1999 producer board reform team, Geoff Sinclair, of the reform team and Stephen Franks, ACT MP.
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By GlobalDataTo read a letter sent at the end of March detailing objections to the merger, click here.
