The Otago Daily Times was told the deal, seen as a takeover by CRT of Farmlands, was expected to be unpopular with some North Island farmers, especially in the Hawkes Bay home of Farmlands.
Previously, Dunedin-based meat company Silver Fern Farms, then PPCS, acrimoniously took over Hawkes Bay meat company Richmond.
However, chairman of the Dunedin-based CRT Don McFarlane said in an interview the consultation between both companies and shareholders was part of the process.
Both companies had been trading satisfactorily and the proposal was future-proofing rather than any other strategy.
The proposal acknowledgement was posted to shareholders of both co-operatives yesterday.
A merger would create a $2 billion-turnover farming group, according to numbers included in both co-operatives' annual results.
In its annual report, released in July, CRT said revenue growth of $200 million (18%) was achieved to create a record $1.3 billion, while operating profit grew 55% to $13.15 million in the year ended June.
Farmlands reported that despite a soft market for rural merchandise in the second half, it recorded a $90 million increase in turnover to $773 million in the year to June, up 13.1% on the previous year.
Mr McFarlane said the two boards had appointed external professional advisers to assist with their investigations and expected to give a further update to shareholders in mid-October.
Any proposals would be subject to full consultation and a vote from all co-operative members.
Given both co-operatives operated in the same sector but different markets, the possibility of a merger had been speculated on by market commentators for several years.
CRT had a long-standing commercial relationship with Farmlands and the suggestion about merging was not new, he said.
"There is value in having a nationwide commercial presence for both co-operatives. There is scale, bigger opportunities and a lot of customers to deal with. It is a logical commercial step."
It was probably easier to bring together two similarly owned groups, both co-operatives operating in different islands but doing much the same thing.
There was not a lot of angst and stress around the proposal, Mr McFarlane said.
Once the details of the proposal had been completed, the material would be sent to shareholders and meetings in the various regions would be held.
The final decision would be made by the shareholders, he said.
The ODT was told the takeover had been forced on Farmlands by the larger, cash-strong CRT laying out its intention to introduce its successful stock and station business and real estate business across the North Island.
Stock trading was a vital component of farming and, together with stock finance, would have seen Farmlands shareholders in a close business alliance with CRT.
A harsh takeover of Farmlands by CRT, with its farmer connections and much stronger cash results, would have been inevitable.
