Remarks By John Roadley To Media Conference
Thank you for being here this morning. It is nearly six months since the Dairy Group and Kiwi signed the historic merger agreement. A lot has happened since then.
We have made our case for the merger to Ministers and Officials and worked with them on the Joint Working Party. We have valued the two companies – the first time that’s been done independently by outside experts. The CEOs of the two companies have developed a Business Case that showed benefits to farmers of $310 million a year by the third year. We have settled on a whole range of issues, from the company constitution to the fine detail of the milk supply contract. The Government has imposed a tough Regulatory Package on us, to protect the interests of suppliers, consumers and even our competitors. It has agreed to introduce legislation to allow the merger to go ahead. The Opposition has said it will support it.
Everyone involved has pushed the boat out for this merger. And everyone has had to be patient, particularly our shareholders and also you as journalists. We’re pleased to announce today that the focus will now move back to where it belongs – to our shareholders.
We are announcing that shareholders will vote on the merger on Monday 18 June – just 19 days from now. They will make the key decision on the merger, and that is how it should be. They are going to receive this box of information in the next few days. It contains all the detailed information the law requires us to provide. It also contains an update of the Business Case, with slightly improved forecasts. We are giving shareholders every last detail on this merger. It must be their decision.
The vote is the last chance shareholders have to maintain the unity and scale of our industry, under the ownership of New Zealand dairy farmers. It is our last chance to build a 100 percent New Zealand owned multinational – a New Zealand company with operations in 120 countries around the world. We want to be New Zealand’s flagship company. We will be New Zealand’s largest company – the biggest investor in R&D outside the Government and the number one training ground for New Zealanders seeking international careers.
The feedback is that our shareholders want this merger. We, however, aren’t taking anything for granted. If this merger proposal should fail, there will not be another one. Nor is the status quo an option. Our competitors get bigger every day.
If the merger were to fail, two smaller New Zealand companies would have to try to take on the world independently. They would not have the scale to succeed – every farmer knows that. At least one of them would become vulnerable to outside control. That is why we urge all shareholders to vote. At stake is everything the industry has built up over the last 20 years. Our unity, our scale and New Zealand ownership all depend on a “yes” vote. And there will not be another chance. That is why all directors – of Global Dairy Company, Kiwi and the Dairy Group – have unanimously signed certificates that the merger is in the best interests of their companies.
No merger is without risk, of course. We all know that. Our farmers know that. As the Government addressed in the Regulatory Package, there are risks associated with having one company so dominant in our industry. But those risks are far outweighed by the risks of doing nothing. For us to stand still in the world would be like the old corner shop trying to stand still when the new supermarket opened in town.
For our part, directors make a commitment to manage the risks of scale with independent valuation every year, and tough international benchmarking. All directors know they will have to put extra effort into making sure they stay in close touch with the farmers who own the industry.
We are also announcing today the appointment of three independent directors to the Global Dairy Company board. We have sought independent directors to bring different skills and knowledge to the board table, and to add an outside perspective of the industry. All three have many years’ international business experience, with long experience of governance in dozens of companies and organisations. They will be known to all of you as business reporters.
Graeme Hawkins is Chairman of Robinson Industries and is a former CEO of Dominion Breweries. Dr John Hood was appointed Vice Chancellor of Auckland University in 1999 after more than 20 years business experience. Michael Smith is Chairman of the Lion Foundation and internet company RD1.com He too has more than 30 years business experience. All three will make an important contribution to moving the merger forward and building New Zealand’s biggest company. Two of them have an important role right away.
It has been widely reported that the Global Dairy Company board has had difficulty appointing a Chief Executive Officer. Not everything you’ve written or broadcast has been accurate. But the general thrust of your reports has been correct. Like everything associated with this merger – right from day one – it has been a difficult process. Debate over the appointment has caused a delay to our timelines of about six weeks.
I’m responsible for that delay. As Chairman, I have wanted a united board. I have sought unanimous decisions. It has not been possible to reach a unanimous decision on a CEO. We have, however, achieved a unanimous decision on a process to appoint a CEO as soon as possible after the shareholder vote.
We have agreed to establish a subcommittee of the board to work on the appointment. The subcommittee will consist of the three of us, plus Mr Hawkins and Dr Hood. The five of us will establish an agreed criteria for selected a CEO. We will then engage an internationally-recognised firm, that is experienced in multinational CEO recruitment, to follow that criteria. When the firm has finished its work, the subcommittee will recommend a preferred candidate to the board. We expect the process to be complete by the end of next month.
The message we’ve had from our shareholders is to “get on with it”. That’s what we’re doing. We’re putting the merger to the vote. We will be meeting our shareholders face-to-face throughout the country over the next 19 days. We will be asking them to make the most important business decision they will ever make. We will ask them to make a decision to maintain the unity and scale of our industry – under New Zealand ownership – so that we can take on the world and win.
It is the last chance to achieve a merger in our industry. No doubt you’ll be following the issue closely. On 18 June, we hope to see you again to launch New Zealand’s biggest company. Greg, Henry and I are happy to answer any questions you may have.