Otago to be dominant port

Port Otago looks set to become the South Island's major port through a proposed merger with long-term rival Lyttelton Port of Christchurch (LPC).

Freight broker DCB International managing director in Dunedin, Mark Willis, said the move, announced yesterday, could drive Port Otago's emergence as the "dominant South Island port".

Its strength lies in its dairy and meat exports through Fonterra and Silver Fern Farms.

It has also spent more than $70 million in recent years on new cranes and infrastructure, has a settled workforce and access to land for expansion.

Shipping lines and port companies agree New Zealand is overserviced with its 14 ports, but rationalisation has been delayed by at least five years.

"This [merger] will be positive because the ports will not be fighting each other for market share,"Mr Willis said.

"The shipping lines can't play off the ports against each other if they are a group."

A merger was also better in the long term than ports going into foreign ownership and dividends heading overseas.

Port Otago chairman John Gilks said if the proposal went ahead there would be one company and one board controlling the operational assets and businesses of both ports.

Each port would retain ownership of its core physical assets, such as wharves and land, which was recognised as being "of significant importance not only to shareholders but to local interests", Mr Gilks said, when contacted.

No timeframe had been set and no details or options of governance or responsibility had been spelled out.

Since Port Otago took a $37 million 15% stake in LPC in March 2006, scuppering a deal to sell LPC to an international port manager, Port Otago and LPC have repeatedly said no formal merger talks were under way.

In a joint statement yesterday, Mr Gilks and LPC chairman Rodger Fisher said the pair had signed a memorandum of understanding "to explore the merger of their respective port operations".

Mr Gilks said options to be considered included whether Port Otago became listed on the NZ stock exchange or LPC delisted.

Ideally, shareholders in both companies would be advised of details by the end of March.

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