MERGER MOVES ‘NOT GOOD FOR FARMERS’

Press, Volume CXV, Issue 33934, 29 August 1975, Page 1

MERGER MOVES ‘NOT GOOD FOR FARMERS’

The chairman of the Meat Board (Mr C. Hilgendorf) charged yesterday that the merger of the New Zealand Refrigerating Company and Waitaki Industries would adversely affect farmers. But his claims were strongly denied by the director of Waitaki Industries (Mr E. J. Neilson).

Mr Neilson said: “Indeed, competition between freezing works might well be intensified by the arrangement.”

Mr Neilson had been asked to comment on a Press Association statement by Mr Hilgendorf, who claimed that “fast footwork” at Wed-! inesday’s meeting of iN.Z.R. shareholders had been jused to “pull the rope from! under the feet of the Southland Frozen Meat Company.” Mr FJilgendorf. of Ashburton. said the interests of farmers should be protected, and! the board was “quite unconvinced” that the Waitaki bid was protecting these inter-i ests. To service a greatly increased capital, increased’ profits — presumbaly from increased killing charges — would be required, said Mr Hilgendorf. The New Zealand! Refrigerating Company had; not shown conspicuous ability to service adequately j capital of even one third of; the proposed amount.

Some ambiguity

Competition to process farmers’ stock would be greatlv reduced if not eliminated over the whole of Otago and in Nelson and Marlborough. Mr Hilgendorf said there was “at the least” some ambiguity about any offer made by Waitaki-N.Z.R.. to sell one or more works to farmers. It might seem to shareholders that these matters were of little concern to them, but this was far from : true. No amount of the “mentali agility’’ necessarv to produce! i the involved scheme for ex-i

'change of shares between .these merging companies would really make a successful and profitable freezing [company. Nor would the type of “fast

'footwork” that had been used to “pull the rope from under the feet of S.F.M.” The most important single element in success was the support, trust and loyalty of 'the farmers’ suppliers. All !freezing works were fully employed at the peak of the [ season, but only those with ready farmer support continued to get their share of the stock when things became 'slack. This was what eventually determined profit or loss.

“111-informed’’ There was no reason to ■ believe that the company resulting from the Waitaki take-over would receive either the required good will or loyalty from farmers, Mr Hilgendorf said. Mr Neilson said that Mr Hilgendorf’s remarks were“surprisingly ill-informed,”-especially when he moved; into fields usually beyond; those of the chairman of the Meat Board. The statement that the: merger of Waitaki and N.Z.R. would be detrimental to the) efforts to build a strong New Zealand-owned marketing company was completely at, variance with what Mr Hil-I gendorf knew to be true.

Rationalisation Mr Hilgendorf knew that the joining of forces between stock breeders and the meat companies could be more easily and more probably achieved by Waitaki and the N.Z.R. joining forces than by any other combination in. New Zealand. “If Mr Hilgendorf compared l dividends now being paid by Waitaki and N.Z.R. separately! with the dividends to be paid' by the merger company, more

I realism would be associated with his remarks about the new capital.” It was true that increased profits were expected, but this would be achieved by greater rationalisation and economies, not by freezing charges in excess of competitors. The protection of the interests of farmers was always a real concern of Waitaki and Mr Neilsen had no doubt of the N.Z.R. also. The competition to which Mr Hilgendorf referred might well be -intensified.

Response pleases Waitaki-N.Z.R. would aim at increasing the effectiveness of its service to producers. Alliance Freezing Company would be the dominating influence in the setting of processing charges in Otago-Southland. Independent operators, including the 'powerful overseas companies and the Southland Frozen Meat Company, would be setting the buying schedules. Mr Hilgendorf was well aware of these facts. It was the intention of WaitakiN.Z.R. to involve producer (interests more than in the ■ past. How this would be actually achieved could be decided only when studies and agreement with producers clarified the best method.

It appeared quite irrational and irresponsible to make premature judgments and commitments. The N.Z.R. shareholders who were now .giving a ready response to :the N.Z.R. offer were very conscious of the issues to which Mr Hilgendorf re'ferred. Shareholders had been I bombarded with information.