Combined Rural Traders chairman Don McFarlane says the
business case for a merger with North Island-based Farmlands is
''very strong'', despite two Farmlands directors resigning over
Charlie Pedersen, a former national Federated Farmers
president from Foxton, and Hugh Ritchie, from Hawkes Bay,
said they did not believe the proposal was in the best
interest of members.
Their resignations this week came as members were due to
start receiving merger information details and voting forms.
A merger would create a $2 billion turnover farming group,
according to numbers included in both co-operatives' annual
In a letter to CRT shareholders this week, Mr McFarlane said
feasibility studies showed potential benefits to shareholders
of $38 million over the next three years, after allowing for
merger costs, reaching benefits of $18 million a year in the
Those gains would enable the co-operative to maintain
competitive pressure on farm costs and pay a healthy year-end
In a joint statement, Mr Pedersen and Mr Ritchie said members
needed to be aware of ''some very serious issues'' in the
documentation before they voted and they urged all members to
carefully read and question.
''Despite raising our concerns and asking for more
information around the merger and process, we have been left
with no choice but to resign, so we can speak out,'' they
They said their four key concerns were. -
• The Farmlands board was not unanimous in supporting the
• The business case was ''short in detail'' and included
deferred expenditure to create the $38 million figure quoted.
Members would also need to have $15,000 of their capital
invested to get the full benefit entitlement.
• The consultant who had driven the merger process stood to
receive ''a significant success fee'' if the merger went
• No agreement had been reached as to how members would be
represented in the future. The ward and voting system was not
clear in the merger documents.
Farmlands chairman Lachie Johnstone told Hawkes Bay Today the
pair were displaying ''a degree of naivety''.
''The deferred expenditure makes up about $6 million of the
$38 million - $32 million is still a significant amount of
money,'' he said.
The board had tried to address the concerns of Mr Pedersen
and Mr Ritchie ''at considerable expense to shareholders''
over the last two months and met them shortly before the pair
released their statement.
The board had voted unanimously to take the merger proposal
to members, subject to changes in wording demanded by the
pair, Mr Johnstone said.
''We responded accordingly, but clearly that was not
He said it appeared the dissenting directors had a personal
Contacted by the Otago Daily Times, Mr McFarlane said
the information being sent to shareholders made a very strong
business case for the merger. That business case had been
well documented and ''tested from a number of different
quarters''. CRT's board unanimously recommended shareholders
support the merger and believed it was in the best interests
A series of 17 meetings throughout the South Island,
beginning next week, would provide an opportunity for
shareholders to ask questions or seek details they felt they
did not have. Feedback so far had been good, he said.
Mr McFarlane hoped the current discussion and publicity
around the merger would raise the interest in the proposal,
saying he wanted as many shareholders as possible to vote.
''At the end of the day, shareholders will decide. It's a 75%
threshold to achieve,'' he said.
In the letter to shareholders, Mr McFarlane said CRT had been
through several mergers and it had grown almost fourfold and
had paid record rebates to shareholders since the last merger
eight years ago.
Two formal meetings must be held to vote on the merger
resolution. The first would be in Christchurch on February 12
and the second in Invercargill on February 27.
''We believe the terms are fair. This merger will consolidate
and strengthen your co-operative for the benefit of
shareholders and agriculture in the future,'' the letter
• In the South, CRT shareholder meetings to discuss the
proposed merger will be held in Invercargill and Winton on
January 29, Gore, Balclutha and Dunedin on January 30, and
Alexandra, Oamaru and Timaru on January 31.