Roadley Says Merger Opportunity Is Unique

Media Statement

Friday 8 June 2001 Embargoed until 1.35 pm

Roadley Says Merger Opportunity Is Unique

“The dairy industry has a unique line-up of support to maintain its unity and scale,” John Roadley, Chairman of Global Dairy Company, told the New Zealand Institute of Primary Industry Management in Christchurch today.

“The Dairy Group, Kiwi and the Dairy Board are all lined up together,” he said. “The Government and the Opposition both say they will support the necessary legislation. We are at a unique point in our industry’s history. We will never have everyone on the same track again.”

Mr Roadley said the path to get to a vote had sometimes been “tortuous” and had taken half a decade or more. The shareholder vote would be the most important ever, not just in the dairy industry, but in New Zealand as a whole.

“The previous Government tried to force the pace of change,” he said. “It meant the industry was neither united nor committed and there was never any Merger Agreement. With the signing of the Merger Agreement last year, we got our sense of direction back.”

Mr Roadley said he was proud to promote the merger because it was the last chance to take the next logical step in the dairy industry’s evolution and build on its success of the last fifty years.

“Our industry has been united by the New Zealand Dairy Board. It has given us the scale to invest in R&D, develop markets offshore and service the biggest customers. The co-operative structure has delivered the returns from our efforts back to the farmgate.”

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He said that if the rest of the New Zealand economy had performed as well as the dairy industry over the last ten years, New Zealand’s standard of living would now be equivalent to the UK’s rather than the same as Spain’s.

But, despite that success, Mr Roadley said everyone in the dairy industry accepted the status quo was no longer an option. “For us to stand still would be like the successful corner shop standing still when the new supermarket opened in town.” He noted that Warren Larsen, CEO of the Dairy Board, had described the merger as “essential”.

The merger would build on the industry’s successes by maintaining its unity and scale under the ownership of New Zealand dairy farmers and by delivering an integrated industry structure,” Mr Roadley said.

“We are not doing away with the New Zealand Dairy Board, as some would have argued. We are protecting what we have built, by integrating the manufacturing and marketing arms of the industry so we can operate more strategically on world markets.”

After the merger, the assets of the New Zealand Dairy Board will be incorporated into Global Dairy Company.

Mr Roadley said he expected the gains from the merger to be higher than the $332 million a year identified by the industry’s updated Business Plan. “Already we’ve learned more about the strategic gains we will get from our Australian relationships.” Further gains could be achieved by launching a co-ordinated international acquisition and joint venture programme. “The new company will start out the ninth biggest dairy company in the world and from there we’ll have an opportunity to climb up the ladder.”

In contrast, Mr Roadley said two companies could not be as successful on world markets. “They wouldn’t have the scale to launch a full international acquisition programme, they wouldn’t be large enough to be attractive as joint venture partners and they wouldn’t have the leverage with global customers. At least one of them would become vulnerable to outside control.”
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Mr Roadley said it was “interesting” that the half-dozen individuals who claim to have launched a last-minute campaign against the merger talk about outside investors, “and that means outside control”.

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