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Trans Tasman Dairy Mergers - Will it be OK

Greetings Readers

Once again the machinations of the restructuring of the Australian Dairy Industry have become the focus of the New Zealand dairy companies.

The NZ Dairy Board has confirmed that it will proceed with the Bonlac joint venture subject only to its acceptance by Bonlac shareholders.

But even more interesting is the undisguised intent of Aussie National Dairy Foods Ltd to seek a merger with NZ Dairy Group after casting aside a friendly offer from Dairy farmers Cooperative.

It seems that New Zealand producers are going to be dragged into the restructuring of the Aussie dairy industry – ready or not.

Warnings are being reported of the risks inherent in these high level mergers. They do not always reward the shareholders in the promised manner. Executives blinded by the merger game as an end in itself, forget that the only reason for the merger is for the improvement of the shareholders position.

Management of these expanding operations is exacting. It is not many years since the NZDG was its self struggling to gain performance levels that matched the rest of the NZ industry following a burst of small company mergers.

No one needs reminding of the risks involved in pioneering production facilities which has been a skill developed in NZ dairy companies. However the risks in the cross Tasman mergers are to do with markets, consumers and competition. Certainly a great area to make profit - but equally a known area of financial disaster following mergers.

Is the skill base together and which management culture will dominate these mergers? Will the gentler Kiwi style of management survive the brashness of an Aussie onslaught? How are directors going to ensure the retention of NZ control under the long established rules of cooperative ownership of the NZ Dairy Industry?

Questions that need an answer…

Good farming

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