Advocates for folding the nation's biggest state science company into its smallest university say it will offer billion-dollar payoffs over the next decade.
Lincoln University chancellor Tom Lambie said the university was looking at merging with AgResearch - which specialises in research related to pastoral farming - to form an "enhanced" institution which would be among the world's top five land-based universities.
"That's going to have significant benefits for the institutions and for agriculture in general," said Mr Lambie, an organic dairy farmer.
"In a 10-year time-frame, there's a billion dollars worth of added value annually that can be added to the agricultural community."
Staff were told of the proposal early today, and consultations were now underway on creating a new university with a combined revenue of $230 million and assets of $485m, which was expected to attract additional revenue of $50m a year.
The leaders of the two institutions said there were big gains to be made in "unbelievable" synergies in education, research and in extension - the transfer of technologies into the wider economy.
"New Zealand is facing a serious financial crisis - we've got to earn our way out of it, and it is the land-based industries which are going to do that," AgResearch chief executive Dr Andrew West told NZPA.
In just one sector - improved forage for livestock - superior ryegrasses and clovers could produce more milk and meat from the same areas of land.
And by enabling AgResearch scientists to contribute to the education of people entering the sector there would be a big lift in technology transfer.
Lincoln's vice chancellor, Professor Roger Field said he expected significant growth in numbers of post-graduate students assigned to research projects on the AgResearch campuses in the Waikato, Palmerston North, and Dunedin.
But it was not yet clear how the new entity would be structured: technically crown research institutes (CRI) such as AgResearch "may" pay a dividend to their Government shareholder, but no such dividend was demanded of universities, even when some, such as Lincoln, were already earning nearly 20 percent of their income from commercial activities.
"Is it going to be a university, is it going to be a CRI, or a new type of beast altogether?" said AgResearch chairman Sam Robinson.
Asked what would happen to the Government's stake in AgResearch, and whether the Crown would end up owning half a university, Mr Robinson said he was not sure.
He did not expect any constraints on the big programme of genetic engineering research by AgResearch, which was seeking regulatory approval for a wide-ranging development of high-value proteins in GE milk from a variety of livestock.
"I personally think genetic modification is a tool which will add value to NZ agriculture."
Overall, Mr Robinson expected the merger to be fiscally neutral, with potential merger costs of $2.5 million balanced by a similar annual saving in costs for the new university.
And the leaders of the two institutions made it clear today they would want to extract all the available taxpayer funding.
The new university's access to Government monies through the Foundation for Research Science and Technology might partly depend on whether it was defined as a science company or a university.
After consulting staff and stakeholders such as shareholding ministers and science funding agencies, the Agresearch board and the university's governing council would decide over the next two months whether to recommend to government a full merger.