Dairy Industry Comes Of Age

The chairmen of the country's two biggest dairy companies, the New Zealand Dairy Group and Kiwi Co-operative Dairies, announced today that they have signed a Merger Agreement after receiving unanimous support from their boards.

"Subject to the approval of 75 percent of the shareholders of both companies, the Merger Agreement will lead to a new era for the dairy industry," the Dairy Group's Henry van der Heyden and Kiwi's Greg Gent said today.

"It is an exciting step forward for the industry and the country as a whole.

"Already our industry generates over 20 percent of the country's export earnings and nearly seven percent of our national income.

"The merger will mean the industry is able to further increase its contribution to the nation's wellbeing.

"It will create the world's 14th biggest dairy company, with fully integrated manufacturing and marketing arms and fully owned and controlled by New Zealand dairy farmers.

"It will be much better able to seize opportunities in the global marketplace and will therefore be well positioned to become one of the world's leading food companies. more ...

"These benefits have been estimated to put more than $300 million a year into the pockets of New Zealand dairy farmers and into provincial New Zealand.

"But the real benefits from the merger are likely to be the increased dynamism able to be achieved from integration of manufacturing and marketing. "

The chairmen said industry leaders were now putting to Government a comprehensive legislative and regulatory package that will ensure a smooth transition from regulation to deregulation, secure continued ownership and control of the industry by New Zealand dairy farmers and which addresses the Government's public policy concerns.

Key elements of the legislative and regulatory package are:
 the sale of the Dairy Group's 50 percent shareholding in New Zealand Dairy Foods Ltd to open up the local market to even more competition

 the removal of the New Zealand Dairy Board's single seller powers one year after the merger

 a Shareholder and Supplier Council to represent the interests of dairy farmers, including a Milk Ombudsman to settle any disputes

 the new company being subject to a regulatory review in three years, and

 provision for fair value exit for farmers wishing to supply a competitor.

"Speed is important," the chairmen said. "We cannot afford to put the industry into a period of protracted negotiation whereby the future structure will be uncertain. We have developed this comprehensive package to deal with all related issues and we are holding nothing back from our shareholders or from the public. The Merger is a fair deal for the country and the best deal we can get for farmers. The full Merger Agreement is being mailed to shareholders tonight."

The chairmen said a formal Amalgamation Proposal would be put to shareholders in March 2001 subject to the companies having confidence of Government support for the necessary legislative and regulatory changes.
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In order to achieve stability and certainty for the industry in time for the 2001/2 season - after more than three years of costly industry debate - the shareholder vote needs to be held at the end of March 2001.

The Merger Agreement provides for John Roadley to be the first chairman of the new company. Mr Gent will be his deputy chairman.

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