Council To Sell Shares In Milk Company

Press, Volume C, Issue 29696, 14 December 1961, Page 16

Council To Sell Shares In Milk Company

The 20,000 £1 shares the City Council has in the Christchurch Milk Company, Ltd., will be sold to the Canterbury Dairy Farmers, Ltd., for £lOO,OOO. The council agreed with this recommendation of its finance committee last evening. The committee said it could recommend expenditure of the money to provide permanent amenities for the citizens.

Reporting on the offer, the committee said £25,000 would be paid in cash on acceptance of the offer. The balance would be paid on or before March 31. 1962. The shares would be sold cum-dividend (if any) and the purchaser would pay interest. When the sale was completed the council would have the right to nominate two directors to the board of the company, “Councillors are well aware that it is the New Zealand Milk Board and the Christchurch Metropolitan Milk Board which control all matters relating to milk and quality, price, distribution, etc.,” the committee said. “The fact that ownership or part-ownership of the milk treatment business is not essential to ensure proper distribution of good milk is established by the continued policy of various Governments, both National and Labour, of disposing of Government interest in treatment stations. In most cases, the interest formerly held by the Government has been sold to producer interests.” Rebuilding Urged The present treatment station was unsatisfactorily sited from town planning and other points of view and was inadequate in size, the committee continued. The Milk Company had been and was being urged by the Department of Agriculture to rebuild. It was conservatively estimated that a rebuilding programme would involve expenditure of approximately £500,000, to which the council would be

required to contribute substantially. Even allowing for the accumulated funds of the company and borrowing, city ratepayers would have to find a substantial sum by direct levy. The dividend on the 20.000 shares was limited to 5 per cent, while any money was owing to the States Advances Corporation. At August 31 the corporation was owed £108,298. The council received £lOOO a year in dividends. The value of £lOO,OOO calculated at 5 per cent, was £5OOO a year. The council could earn that by investing the sum. “The real price will be around £102,500,” said Cr. H. P. Smith, chairman of the committee. The Mayor (Mr G. Manning): It sounds like a takeover. “No it is not a takeover.” Cr Smith continued. The council would still have representation. There was a long history of the disposal of milk treatment stations by both Governments, he said. They had agreed there was no danger to the quality or price of milk because of the control of milk boards. “The Right Thing” “I am quite satisfied we would be doing the right thing by selling the shares.” Cr. Smith said. “I cannot see any disadvantages and the advantages of being able to spend £102.000 for the benefit of the citizens without having to borrow it or take it off them must influence the minds of -all who wish that when there are so many demands the rates should be kept within reasonable

bounds. I have no misgiving at all.*’ “We will be doing the ratepayers a very good service by accepting this capital profit," said Cr. H. G. Hay. He was satisfied that as there would be continued representation there would be nothing to fear on the question of the standard of milk and milk treatment. Councillors would be failing in their duty if they did not recommend to the ratepayers as “shareholders” an attractive proposition. An independent valuation of the shares had been obtained, and the offer was in excess of the valuation. It could be that some of the money would be used for the town hall fund, Cr. Hay said. The milk company was facing heavy capital expenditure, and if the council retained a financial interest it might be faced with contributing £250.000. which could only be raised by loan, Cr. Hay added. Mayor Agrees When the council had gone into the company it was actuated by a desire to protect the standard of milk treatment tor the consumers, said the Mayor. With continued representation on the board the council would be “on the safe side.” There was a willing buyer, and he thought everyone would agree with the committee’s recommendation, the Mayor said. “We now stand at the crossroads: if we don’t sell the shares now they will never be sold.” said Cr. G. D Hattaway. The company was facing great capital expenditure. “The consumers are protected in full by the New Zealand Milk Board and the Christchurch Metropolitan Milk Board, and by staying in the company we have nothing to gain in that respect.” he said. “The money can be put to far better use.”