FACTORY AMALGAMATION.

Hawera & Normanby Star, Volume LXXIV, Issue LXXIV, 3 August 1917, Page 2

FACTORY AMALGAMATION.

SnTrfThT 611 in the '^&::ni one ot the conveners, explained tint immm wmmm ■ th* y P £' am uhe» the question of ' ££*?' "r ereas JoU's.6o. desSd[to be" ■ that S USS thG °i her and imfl ■he r. eason he now desired to make this explanation. rfns? Po"; drel. 1 said that as Mr Murdoch was leaving by train for WellingPn iVhm t e/P° ke to him, he (Mr SStft Hennglti^howS'r that he had not the slightest objectira to the question of re-grouping of fac™T fr a? 7 -°ther matter thlt might dS^ tilGlr mUt-Ual benefit _ The question of amalgamation, Mr fnZl* jent <>n to say, had been betoie his directors ever since the Joll U> purchased their concern, but Kaupokonm never felt disposed to make any move and it was not until the amalgamation of the bacon companies^ yas being brought about that one of the Joll Co. directors, Mr Johnstone suggested to the speaker that an enaeavor should now be made to bring about an amalgamation of the two , dairy ractory companies. The Kaupokonui directors then indicated their willingness to consider amalgamation vU men*lon of it in their last years balance-sheet, and later on the Joll Co. directors met the Kaupokonui directors, and although very little was there argued against the' suggestion £/f ft- ultimately sent notice that they had turned down the proposal. That was the end of the matter so far as he (Mr Powdrell) was concerned wWnT °- £ c Joll Co- directed ™™ + + m, lgllt say was one of those most strongly opposed to amalgamation at their conference of directors had since seen ht to publicly advocate amalgamation. He referred to Mr Lye As a result of his exertions this meetl Pg i Va?iv now being held > and he (Mr Powdrell) trusted that in their discussions they would all take the criticisms in the spirit m which they were intended. In order to show what one company was losing against- the other it would be necessary to quote figures trom their balance-sheets, but in doing so he would again make it clear that it was not m the nature of a criticism, but merely m order to show the advantages to be derived from amalgamation And in considering the poaition they must consider it not from the pomb of view of their chairman, secretary or manager, but from the ! point of view of shareholders or milk suppliers and to approach the question impartially and with open minds. He would first of all endeavor to show what savings could be effected if the two companies amalgamated. To start with there would be only one chair"i aij»'i 2A ld thls would result in a" savinoor ±,150 a year, plus his expenses attending conferences, etc.,- say £10 lhen there was a general manager, with his motor car, benzine, etc amounting to at least £450 a year At present there were two secretaries, and whilst he did not say that one secretary could do all the" work of the two companies amalgamated, one good man and assistance could do all the wor.k, a saving of £200 a yea r could be made under this heading Ihere were two sets of directors, and iIOO could easily be saved here, besides getting, a better choice of mentor one directorate. Supposing that they cut out two factories—he could not indicate which should be cut out that would be for the directors of the amalgamated company to decide—they would save the expenses of two managers at, say £300 each. One factory at Auroa and one at Kapuni could be a? ou\ an 4he I migllt say that at Auroa the Kaupokonui Co. had a 12----vat factory capable of dealing with the supplies of both companies. They could also save the cost of fuel and a firemans wages at both Auroa and Kapuni, probably amounting to £150 in each case, /oil's Co. fad probably three motor waggons, but under amalgamation savings could be effected Here overlapping avoided, and consequently less wear and tear on their county roads. They might safely [£*° n 4 10° \ year savin S on this 7^bn J hese lt l ems rePresented a savor iAIbO on salaries alone, and it was an accepted axiom that the greater the supply the less proportionately was the. cost of manufacture. The installation of water power at Kaupokonui (56h.p.) and Auroa (75h.p ) had a very great bearing on their fuel account. Last year, with between onequarter and one-fifth greater output than Jolls'. their fuel bill was £1415 as against Joll's £1545, and this, notwithstanding that Kaupokonui was pasteurising at all its factories. To illustrate what a great benefit water power was, he might mention that the yea* berore, before they had the pasteurising plants, their fuel account was only £924, as against Joll's £1545—a saving of orer £600 on an output of between one-fourth and one-fifth greater Then m the matter of buildings, Kaupoko^ nui s main factory was almost wholly concrete; .so also was Auroa. That meant a considerable saving in depreciation, painting and fire insurance. On wooden buildings 5 per cent, depreciation had to come out of suppliers' pockets, and was nab that worth saving? Last year the cartages from Kaupokonui_ to Hawera station amounted to £956. and the back cartage to the store '31. If thej had not had their atore at Kaupokonui they would not have had the benefit of this back freight, oonsequently the store enabled them to reduce the cost of carting their cheese to Hawera by nearly one-half. Amalgamation would enable one big company to have its own motor mechanic, and whilst on the topic of motors he might mention that he had seen 'the electric waggons running between Rongotea and Palmerston. They did the trip aA a cost of only sixpence, and recharged their accumulators by means ot a suction gas engine. Kaupokonui had its own water power, and could reohargo batteries on. waggons for practically no cost at all. A number of people had railed at the store at Kaupokonui, but he could assure his hearers that that store had been an immense advan-

tage to the company. For example 'f pheiJirLv adG f ? ayinent "up! pueis to-day and to-morrow receive* payment for a shipment of cheJst ■ ffomitmg to, say, £10,000, insteS of that money lying ' idle Ullti I-TOviS ilio daivv rate & in*eres£, ; Ft!? &£&£s? $z&5 I having to pay m?+L y comPanies - thait .Kaupokonui and Jo Ps h^^ iiilPil In 1916 Kaupokonui, according to t& balance-sheets, beat Toll's by £8m «1 I years that the Joll Company had beitSS ; wiping put this balance of l2s the Kau pokonu, people were ther.e that day to cio it. He was sure that there was no animosity between the suppliers of+SS «I more farmers than any ither mani lows:— 1909 ToTl'« qsm ■£- , ro. 3-^; 19^'3.7f aY 373 Ki a9lT kT"2 Ito 8' 78! 1" 1? 2 ' 3-74 «nd' 377 '1913 SIS' mistake had b-"^»S Mr D Hughes: One company nut more moisture in their cheese^han ?fae thf W O«fS: T^ wou-ld ™t lessen tne te*,t of the milk received that°?t wff• M*P°r drell rei"^ked nl U?ha°t nhr S- H° might the i! ing (that his company would gladly accept a valuation basis and would ,t----fS "CCept that position if Tt would tacilitate amalgamation; Ihirine t£ 19 years that Kaupokonui had b&n in operation they had written off oi pl ac ed to a redemption account £21 259 jt Sid* S T?° Ie °ff f y ' 5 on accuont, lt was a long way too m u c} f and the company was then actually building up a capital account. The JoU Company had written off practically thi £ mtL aST • ll Ka*Pok?nui had "done in the last eight years, and one-half of that amount was actually not dem-ec? ation; it was really building ud a r P serve but it was sound finanle Pln the" event of amalgamation, therefore Kau pokonui would be offering to Jolt's one! halt of their reserve of £91 o^o "L nearly £11,000, if J o # a agreed' 2 amalgamate on'the same baaTu Kau^ pokonu, The suggested eond&o" w^ tlthJ at\ T paDy should join tS ?n +^1' k"° the same number «f shares in the new company on KaupokonuS basis of one share for every S so f The amount of new shares would be about 8000, and these m>uld bear interest at 6 per cent. perlmXi ation on th«ee lines were agreed to Kaupokonui would be making JoS's an ±?£ te f ltt $£ n >™> wofthof re ! selves. In addition there would be a store, which, for the past th?ee years and thk c a Prl ßt °f £2000 and this yoar he ventured to say it would make more than that-and thesl profits had been set aside every year un? til now the store account reserves totalled £10,800. In these the Toll Company would share half and half m proportion to the shares taken up in the new company. n^A Voice: That is unfair to KaupokoMr Powdrell: i have already sam that increased supply means decreased cost of manufacture. That will compensate us for the reserves we are offering said that he had heard reasons mentioned against amalgamation, an d one was that it cost Joll's less to get their produce to the railway than it cost Kaupokonui In the case of Oeo, Sutherland road, Kaupokonui and Waiokura Bfc would cost Is 6d per ton more than KapHm Duthie road, or Tempsky roß^,-^ the total would onl J amount to ±-100 a year. Would not Kaupokonui s economical water-power more than compensate for that? and would not the £2000 a year earned by the Kaupokonui store wipe off that £130? Additional share capital had been the great bogey held up to the Joll shareholders—the amount of capital they would have to find if they amalgamated Moat of them had money lying idle, and if they did not they could get it from the bank under their old arrangement at 5i per cent, and get 6 per cent from the company for it straight away. When Kaupokonui altered its snaro basis and so got in more capital they at once commenced separating whey. The Joll Company were cautious; they waited for a year to see how Kaupokonui got on • tho^ saved their share capital alright' but they lost £5000 that Kaupokonui made out of whey butter that year Last year Kaupokonui decided to instal pasteurisers in all their factories and

that made them Tip to £100 a vat on 40 vats, or a total or £4000. Here awn Joll's Company saved their share canltal and Tost £4000. This year Kaupokonui had made arrangements with the_ Government department to gazette tneir present curing room a grading store. They had their big insulated room connected with their freezer, and when this was full it would earn £500 a month for storage. If the Joll Company were amalgamated with Kaupofconm/this store would be filled much more rapidly and would consequently earn its storage charges all the sooner, but the Joll Company had been saving it;i capital and losing these opportunities Because of the fact that Kaupokonui Mad the capital the company had been for some time past buying in its shares at los each, and these were yielding 12£ I cent, interest. Statements had been made that Kaupokonui was a rotten concern and that the idea of amalgamation was to get Joll's to take over their huge liabilities. Such talk was all moonshine. Kaupokonui was one of the richest companies in New Zealand This year they allotted 2860 new shares; last year 3000 odd, and the previous year about 2860, and as the paj--ments for shares were spread over a period of five years, this together with depreciation on reserves, approximated £10,000 coming in tto the company this year. If anyone doubted the financial strength of the Kaupokonui Company, let them bring along the best auditors in New Zealand, and if, after a thorough investigation they did not find that Kaupokonui was stronger financially than Joll's, he would forfeit £500 to the Hawera hospital. Their total reserves were £25,000 or £26,000 betjter than Joll's, and people might say if that was the case the Kaupokc*nui people were fools to offer to give them away. The reason was this: Any individual supplier of Joll's could come to Kaupokonui and become a shareholder without any premium being asked. If ? therefore, it was right to admit an individual on those terms, it was right to offer the same- conditions to the Joll suppliers as a body. "You are farmers just as w.e are," concluded Mr Powdrell, "and every man is entitled to get the utmost he can out of the milk supplied. If we can offer you i&ny assistance without detrimentally affecting ourselves we are willing to hold out the helping hand if you are willing to accept it." (Applause). Mr J. B. Murdoch, chairman of the T. L. Joll Dairy Company, explained that the question of the amalgamationof the Kauqokonui and) Joll companies was first considered at a conference of the directors of the two companies. The directors of the Ivaunokonui Company offered the directors of Joll's a very nice position, with promises of ail sorts of. good things, with the result that a meeting of the shareholders of the two concerns had been convened to discuss the proposal,. With reference to the proposed offer from the Kaupokonui directors to the Joll company, to amal- [ gauiate with the Kaupokonui company, one of the conditions set out was, unfortunately, that the Joll directors would have to put into all their factories regenerating plante, which were better Tcnown as pasteurisation plants. The Jkrll Company had got t>asteurisatjon machinery in two of its factories, •and &o equip the whole of the factories with, such a plant would cost approximately £2000. Another condition was that his shareholders would have to 'increase their share capital up to the • same basis as that of the Kaupokonui shareholders. T© ask the Joll Company shareholders to do something which it was not proposed to ask the Kaupokonui shareholders to carry out was quite unfair, and under these circumstances the Joll directors had no option at the conference but to turn down the amalgamation proposal. The question of the regrouping of factories was also mentioned at ihe> confe£<ence, but unfortunately this «!id not suit the Kaupokonui diir*eetors, who wanted a straightout amalgamation. Mr Powdrell had placed a very nice case before the shareholders of two companies that day, bnt he {Mr Murdoch] had not heard anything that would convince him that amalgation was in the best interests of the. shareholders,; those of the Joll company *n .particular.. Mr Powdrell had quoted numerous figures to show ttJie amount of saving financially that *vould be -affected if the two companies were amalgamated. Mr Powdreil had said that would moan 'the saving of £150 a year in renumeration for a chairman ■ because there would ;be only one chairman.. He douibted whether such a saving could «fre effected as the combined companies would entil a considerable amount of extra work unpon one man, and incidentally more expenses. He would like to see Mr Powdrell running these two big concerns for £150 .a yeor. It had also been suggested fcv Mr Powdrell that about .3ESDO .would 'be saved in saJary and expenses for-a-general manaj ger, but he contended that there would ' be little saving in this.direction as .they ' would .have to rnve a large salary for I a.- firsJ-class .general manager to jun ! xhe combined .companies. \ A v.oice : .They are .not.going .to be | combined. (Laughter). : Continuing, Mr .Murdoch also .eontended that there would be no saving, , elfected in the secretarial work as ; stated by Mr PowdreH ; he doubted if ; there .would .be a sax-ing of .£SO. .let j alone £200, because the combined companies would have to give. the secretary !a- Jjfflpgex^salary than what.the two compajiios .wece .at .present paying .the jvc- , spective .secretaries. Then it had been stated that about £liX) a year corld Ibe saved .in directors' fees, but as ihe directors' .fees of the JoJl company to re only £76 jier annum, and as. some* of.the directors .vrould .have to come long .distances if there was amalgation, he wiis afrasd there would be iittle saving in this direction. Mr Powdrell pointed out that by amalgamation, a saving ol about £300 .would-be effected in labor so far as the Auroa and Kapuni factories were concerned, but he (Mr Murdoch) contended that the.simalgaraation. would *snly .result in the saving of a casual laborer's wages, approximately £150 a year. JPpssibly the two particular factories (Kapuni and Auroa) employed bet.w.e.esi them thirteen hands, and if tkey were amalgamated at least 12 men would be needed, so .where would the £300 saving come in as mentioned by the Kaupolkohui chairman ? He questioned .also .whether tkere would be a material decrease in .tho cost of fuel. There could be no saving in cartage; the JoH \vji<rgons were running full every day. ivhue he understood that th Kaupokonuie .directors would probably increase the number of their waggons in order, to meet tJie continued ,j growth of the'traffic, so he tailed to^see k where amalgamation ivould effect a- saving in the carting. The whole of Mr .Powdrell 's arguments applied only to regrouping and not fo amalgamationhe (Mr Murdoch) did. s&ot berieye,.amalgamation would make one fraction -cf a. peainy difference in the market price of their stuff. He had noticed by the press reports that dairy companies and local authorities had been considering the qiiestiqn of overlapping and how to deal -with it and prevent a good deal of unnecessary wear and tear unon the roads, and rightly so, too. The JoE Company, ho wont on to say, took over the whole of the assets of "the late Mr T. L. Joll nine years ago. The assets extended from Okaiawa to Otakeho. And the company, in about 9 years, had pretty well wiped out all its liabilities to the estate. The company owned buildings which would compare with any in Taranaki. The company had got one concrete building; Kaupokonui had got two. These were just a few of the points which he desired to

place before the meeting. In discussing the question of amalgamation he did not think they should go into the bal-ance-sheets of the respective companies; the point which had to be considered was, were the Joll shareholders (or even the Kaunokonui shareholders) by amalgamation going to receive one penny, or a fraction of a penny, more for their porduee; if they were, then he thought they should favorably consider amalgamation. If they were dealing with raw material in one nlaee, and with the finished article in another, then amalgamation would be a good thing, but in the case of cheese, ie was manufactured ready for the London market at each particular factory, and he did not think therefore, any saving was groins; to be effected by amalgamation. There were in Taranaki about 53 cheese factories, with numerous branches, and he maintained that competition was an incentive to progress. Business emulation was the very thing to have in connection with, any * business. The more competition they had in connection with the butter and cheese industries tine better were the results going to i be. (Applause.) J\fr Powdrell had quoted certain figures wherein he said the Kaupokonui Go. had beaten the Joll Co. He was not prepared to say whether those figures were correct or not for the reason they were based upon a position which he himself had not worked out. He was not, however, questioning the figures. The companies exchanged their balance-sheets, and if Mr Povdrell's figures were found to be correct then the Joll Co. would examine its details, find out the reason why Kaupokonui had beaten them, and then endeavor to beat Kaupokonui in tlie particular items referred to in the coming season. Mr Murdoch went on to draw a comparison between a. large concern in the north, and a company in the Stratford district, which showed out in favor of the smaller concern. He said he could give several other illustrations to show that smaller companies frequently did better. Personally it pleased him a great deal to be able to meet the shareholders of both companies that day, because it was in this way that they learned to understand one another the better. He had carefully listened to Mr Powdrell, but he did not see that they were going to gain one fraction of a penny more for their produce by amalgamation. What Mr Pbwdrell had- said referred particularly to the federation of the various companies, which he was sure would be a very good thing. If they were to federate and still maintain • their individuality they could possibly have more control in regard to their shipping and getting their produce on the Home markets, which would mean practically many thousands of pounds in the price of their produce, Mr Powdrell had taken up the position that the Kaupokonui, Co. was in a greater degree tetter off than the Joll Co., and in support of this had quoted the reserve fund of the Kaupokonui Co. as being larger than Joll's. But these big reserves were useless unless they could produce when required the "golden sovereigns.'" If a balancesheet showed reserves at £10,000, and a bank overdraft of £10,000, lie would like to know where those reserves uere. He was sorry that Mr Powdrell had thrown some aspersion upon the management of the Joll Co., as he (Mr Murdoch) Tiad -never made any aspersion upon the Kaupolsonui Co.

Mr Powdrell disclaimed any intention to cast any reflection upon the management of the Joll Co.

Mr Murdoch contended "that Mr Powdrell, in some of his remarks, had left such an inference in regard, to their tests. He went on to say that he did contend it Tvtis a 'mistake to have two factories, one belonging to the Joll and the other to Kairpokonui, at Kapuni and Auroa, as it was not in the interests of economy to run two factories in the same locality. He believed the suppliers could come to some arrangement in regard to one •or other ot the companies taking over >one of these factories, and it would he possibly a good thing if something was <&one in this direction, as it would save n. .good deal of overlapping. l\lr Pow<Jrell had referred to the question of finance, and he (Mr Murdoch) consi&ered that the finance of their factories should he placed upon a sounder basis. So far as the Joll Co. was concerned it had not one penny of liability in regard to finance. In conclusion "he would say that his directors were 'biit to mttJke the most they could for their shareholders, and if ne thought that amalgamation was going to give the suppliers more for their produce then he worild seriously consider it; but he was eorrvinced that it was not going to dft so. He would advocate federation of the factories, which would be in the best interests of the companies. He pointed out that any resolution passed at the meeting would not -be binding, as each company would have to further consider the question at their respective annual meetings.

In the course of his reply Mr Powdrell t>aid thai, he regarded this meeting as oik! of the most important that had eve'- been held because it was beyond question ■- that amalgamation "would mean thousands _ of pounds to dairy .farmers in this> district. It was quite true that one <of tlio conditions of amalgam.'iLiff 1 wns that the .Toll Company should put nast-->w risers into all their faci-ories. Kaupokonui had

them already installed, and it would be penalising Kaupokonui suppliers if Joll s came m without them. The suggestion was that amalgamation should be deferred until such time as Joll's could instal pasteurisers. So far as the chairmanship was concerned, he could say frankly that he was not chairman of Kaupokonui for what he got out of .it; it the two companies were amalgamated ne would still be willing to "do aH<sn e could because he was deeply interested m the development of the district, and had grown up with his company. It the dairy companies were amalgamated it would be a great advantage when selling their butter locally; instead of buyers being able to play one company off against another as at present, they could then diet-ate their own terms. He expressed surprise at Mr Murdoch's" criticism of Kaujwkonm's reserves; he had always looked upon Mr Murdoch as a business man, but he could only repeat his offer to submit the whole position to the best auditor they could get and let him decide the financial position of Kaupokonui. _ After some other speakers had addressed the meeting, Ttfr Powdrell moved that a vote of the shareholders be taken a® to whether they were in favor of amalgamation. , He subsequently amended the motion to read ''That a vote of the Kaupokonui shareholders be taken." This was seconded by Mr R. Dunn and declared by the chairman to have i been carried imanimously. A vote of the Joll shareholders was not taken, Mr Murdoch saying that the question would be considered at the annual meeting. Mr Hughes asked Mr Murdoch what would he do if the suppliers in the western end decided to come in with the Kaupokonui Company. Mr Murdoch said that it would entirely depend upon the shareholder* | what was done. He was not in favor of amalgamation at present, but was agreeable to re-grouping, as he believed this would save a good deal of the present overlapping in some of the localities. The meeting then dosed.