Wrightson-Dalgety merger approved

Press, 28 August 1986, Page 26

Wrightson-Dalgety merger approved

By

SIMON LOUISSON

in Wellington

The Wrightson-Dalgety merger has been given the go-ahead by the Commerce Commission with five new strings attached. In addition to excluding the Wellington, Manawatu, Wairarapa, Wanganui and Taihape regions from the merger, the commission’s deputy-chairman, Mr Barry Tucker, announcing the decision yesterday listed five other specified conditions.

Wrightson NMA will have to:

• Promote changes to the constitutions of the Stock and Station Agents’ Association and the Woolbrokers’ Association; • Promote changes to all practices and documents of any company

with an interest in auction facilities for livestock and wool;

® Accept that new entrants to auction facilities only be judged on financial criteria;

® Refer any disputes arising from the level of fees or purchase price to arbitration; and • Effect all changes to rules and practices as early as possible and no later than March 1, 1987.

Mr Tucker said that without the conditions the merger would not have been approved by the commission. The commission had received an unprecedented 180 submissions in response to its call for public submissions on the merger of New Zealand’s two largest stock and

station companies. “It was apparent that there was widespread concern among fanners at the implications of the merger for the preservation of effective competition among suppliers of goods and services to the fanning community, particularly when farmers themselves were under a good deal of economic pressure,” said Mr Tucker.

Fletcher Challenge reacted to the news by saying it was “all systems go” for the new $650 million company.

“Four thousand staff of the two companies and many thousands of farmer clients would be very pleased that the commission has agreed to the merger,” said executive chairman of Wrightsons,

Mr Barrie Downey. “Technically, the new company begins trading on September 29, but from tomorrow most management and staff functions will start integrating.

He said that in the five months it has taken the commission to approve the merger, the plight of the rural economy had worsened. He cited the example of sheep and beef farmers whose average income would be $13,400 for 1986-87, up 26 per cent on last year. But this is only a quarter of the income of 10 years ago, he said. The merger would free up to $l5O million of assets over two to three years through the sale of duplicated assets, and all this would be reinvested. "

Since the merger was announced, over 800 jobs have been eliminated to reduce costs. Most of these had come through retirements, resignations and voluntary redundancy. Through a comprehensive job search programme 490 positions had been identified and 118 people placed in jobs. FCL is still disappointed by the decision to exclude the five regions from the merger — a decision recommended by the Examiner of Commercial Practices because of the concentration of power that would have resulted from the merger in those regions. The commission found that for most product/ service markets adequate protection existed. In some areas there was a very high aggregation of market shares, but there was a variety of traders offering similar services.

“This could not be said of livestock and wool trading. In these markets, not only would the merged enterprise have a high market share, but also there were very high entry barriers for new or potential competitors,” said Mr Tucker. “Because livestock and wool trading formed the core of the stock and station agency business the commission was bound to view with concern the effect of the proposed merger of this particular market.” The rules of the Stock and Station Agents’ Association needed changing to allow easier access. Wrightson has given assurances that it will work for the removal of the barriers. Mr Tucker commented that Elders Pastoral, Ltd, was a full party to the case because of its alternative proposal to take over Dalgety.