Consultant calls for Alliance delay

Press, 24 July 1986, Page 28

Consultant calls for Alliance delay

Mr Michael Mellon, a Christchurch business consultant, is calling on small shareholders in Alliance Textiles, Ltd, to delay accepting the takeover offer by R. and W. Hellaby, Ltd. Holding about 0.5 per cent of the capital of Alliance, Mr Mellon is a substantial individual investor in the company. He says he is concerned about the effects of the take-over on Mosgiel, Milton, and Timaru, where the firm has mills and is a large local employer, and urges other shareholders to delay accepting the Hellaby’s offer until stronger assurances are given about maintaining jobs in Alliance factories. Hellaby’s has given an assurance of continuity of employment for Alliance staff. But such an assurance "could have been plucked out of any Brierley take-over offer, and is

far too flimsy.” Mr Mellon says he sought a greater assurance yesterday from the chairman of Alliance Textiles, Mr Reid Jackson. "I am pleased to report that Mr Jackson personally holds the same views as me on the need to maintain the economies of these small towns. The question is will Mr Bruce Judge (of Ariadne, Australia, and a director of Hellaby’s)? “My concern is not to maximise the return to shareholders but to ensure a sound production base to process one of New Zealand’s key products — wool.”

Alliance is an important influence in New Zealand’s wool market, he adds.

Mr Mellon says he believes in responsible capitalism, recognising its role in the community. "I am opposed to the

current popular business philosophy of maximising profit at all costs. I believe that the first goal of a business organisation is survival, and the second is growth of output, and that profits are byproducts.” Mr Mellon says he is quite satisfied with a rate of return below the steep current interest rates.

However, the normal target rate of return by investment companies is more than 30 per cent, he says.

Mr Mellon is generally critical of what he sees as the continuing fall in the number of “production companies” listed on the Stock Exchange and their replacement by investment companies. The mood in New Zealand is to replace companies that produce goods and services with “shufflers of assets;” that is,

investment companies. He is also critical of the information supplied to Alliance Textile shareholders for their decisions about the Hellaby’s offer.

The information was thin, and the balancesheets supplied were many months out of date, he says. Other take-overs have been the target of Mr Mellon. In December, 1982, at the annual meeting of the Printing and Packaging Group (earlier, and later again, Whitcoulls), he asked directors whether there was a clear strategy to ensure the survival of the company, retain its identity and ensure the continuing employment of staff.

(Whitcoulls has since been absorbed into the Brierley’s group, and the national headquarters moved to Auckland.)