CRT chairman backs merger

Don McFarlane.
Don McFarlane.
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 the proposal.

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 results.

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 third year.

Those gains would enable the co-operative to maintain competitive pressure on farm costs and pay a healthy year-end bonus rebate.

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 said.

They said their four key concerns were. -

• The Farmlands board was not unanimous in supporting the merger proposal.

• 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 ahead.

• 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 enough.''

He said it appeared the dissenting directors had a personal agenda.

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 of shareholders.

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 said.

• 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.

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