Ruling on stock firms’ merger will take time

Press, 22 March 1986, Page 1

Ruling on stock firms’ merger will take time

By

SIMON LOUISSON

in Wellington

A decision to approve the proposed merger of Wrightson NMA and Dalgety Crown is likely to take five months, according to the Commerce Commission’s chairman, Mr John Collinge.

The Examiner of Commercial Practices, who has received notification of the proposal, has 50 working days to report to the commission which in turn has 50 working days to come to a decision.

Mr Collinge said that in view of the controversy about the proposal the full period would be needed.

Crown Corporation, which owns Dalgety Crown, hopes for settlement in July. "If they take longer than that we will have to live with It,” said Crown’s chairman, Sir Roderick Weir.

Fletcher Challenge, Wrightson’s owner, is, hopeful of a decision by August 1. It is kjten for the commission’s investi-

gation to be made as "expeditiously as possible.”

Fletcher has no particular strategy for presenting its case but resources have been marshalled so that the examiner can get answers as quickly as possible.

If the commission declines to allow the merger, the companies can appeal to the High Court. Some recent cases, such as the Brierley Investments attempt to take over New Zealand News,

have gone against the commission. The Minister of Trade and Industry, Mr Caygill, will not comment on the merger until the commission has reported, but political sources suggest the proposal will be declined.

Mr Collinge commented that even if the merger meant one store was closed in a town which previously had two, this did not necessarily foreclose competition.

He said the commission would also look at the benefits the applicants would gain from the rationalisation. Any decline in the need for services had to •be recognised.

However, Mr Collinge said that if the examiner found that the merger did restrict competition, the commission would need good reasons to approve the merger.

Market analysts suggest that the merged company, Wrightson-Dalgety, would

have between 60 and 70 per cent of the pastoral services market. About a. third of the assets would be rationalised and costs would be pared 20 to 40 per cent, they say. The analysts said that an important factor in favour of the proposal was the emergence of Elders as a most active participant in the market. Market share has little bearing on the matter but the possibility of market entry was the most relevant factor. Failure of the merger to proceed would have severe implications for Fletcher and even more so for Crown. Sir Roderick talked of diminution of services to farmers and almost certainly both companies would divest themselves of many parts of their rural business. Fletcher said the merger proposal was a sur-. vivai strategy and that the status quo was not an option.