Hon Trevor Mallard
Minister for State Owned Enterprises

21 June 2007 Media Statement

Bill enabling merger of two SOEs passed

A bill that will enable the possible merger of two State Owned Enterprises, AgriQuality Limited and Asure New Zealand Limited has been passed into law today, State Owned Enterprises Minister Trevor Mallard said.

"The State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill will permit a merger of AgriQuality and Asure, provided that shareholding ministers are satisfied that it makes commercial and strategic sense for New Zealand. Secondly, it allows shareholding ministers to direct the Board of AgriQuality not to provide red meat inspection services," Trevor Mallard said.

"Significant quantifiable gains are expected from a merger of the two SOEs, derived mainly from scale and scope economies, increased competitiveness and an enhanced biosecurity capability. Any merger is still subject to Cabinet approval, based on a business case showing demonstrable benefits.

"Concerns about aspects of the bill were raised during the select committee process, the most significant was that by reducing the prospect of competition in the provision of export red meat inspection services, the bill could result in higher prices and lower service levels than would otherwise be the case.

"In response to these concerns, I have developed a Supplementary Order Paper which will constrain the ability of the incumbent monopoly provider of examination services (whether this be a merged entity or not) from abusing its market power.

"Under the bill, the Commerce Commission must investigate and report on the prices charged for examination services within three years after the commencement of the Act. There is also provision for the Crown to continue its negotiations with international trading partners to permit examination services to be undertaken by agencies other than the Crown.

"Further, if in future more than two-thirds by value of New Zealand’s red meat exports are made to international trading partners that accept international guidelines on meat hygiene, the government will permit private provision of examination services.

"This bill is critical to maintaining and enhancing shareholder value in AgriQuality and Asure, companies owned by the Crown on behalf of all New Zealanders. It has the added benefit of improving New Zealand’s biosecurity response capability, at a time when New Zealand is becoming increasingly at risk from incursions," Trevor Mallard said.

ENDS

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