After the first attempt at a merger between dairy industry giants New Zealand Dairy Group and Kiwi Dairies fell apart nine months ago, it always seemed possible that the respective executives would try again to find agreeable terms for the creation of a mega co-op that is expected to boost export dairy sales from NZ$7.7bn to NZ$30bn by 2010.
Now expectation is rife that such an announcement can be expected any day.
Greg Gent and Craig Norgate, chairman and CEO of Kiwi Dairies, and their counterparts from NZ Dairy Group, Henry Van Der Heyden and John Spencer, met for talks with agriculture minister Jim Sutton yesterday (19 December), and Kiwi Dairies director Murray Gough admitted that the low-key but high-level discussions might well bring merger news this side of Christmas.
The most likely signifier of a merger is the fact that both companies have appointed a joint PR company to handle communications on a deal, despite having their own in house PR teams.
In 1995, a study laid plain the benefits of a merger of this scale in terms of the cost savings generated through the integration of marketing and manufacturing. At the time, NZ$300m annual savings was touted as a conservative estimate, and the 14,000 farmers in the country are hoping that this time if the government backs a merger application to the Commerce Commission, it will not be turned down.
The Commission previously ruled that having only one company to supply outweighs the cost saving benefits to farmers, but this time round the farmers are vocally supporting the merger.
Charlie Pederson, dairy leader of Federated Farmers, confirmed that those he represented “absolutely” want a mega co-op because it is ridiculous to suggest that there is a huge difference in the philosophy of the two companies. “We are the same farmers, we have the same views,” he said.