Major benefits seen in merger

TIM CRONSHAW
Last updated 05:00 18/12/2012

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Farmer shareholders will cast the final vote in mid-February on whether a merger of the rural service co-operatives CRT and Farmlands Trading Society goes ahead to form a $2 billion business.

An expected $38m of savings and increased revenue would result in the first three years from combining the businesses.

Shareholders will have received letters from CRT chairman Don McFarlane and Farmlands chairman Lachie Johnstone telling them that management have prepared the way for the two co-operatives to join together.

They say the proposed merger is the logical step in forming a nationwide farmer-owned co-operative, subject to shareholder approval.

If successful, the merged business would rank it near the top three of farm supply businesses with PGG Wrightson and the Fonterra-owned RD1 companies providing the main competition.

The CRT-Farmlands hybrid would have a customer base of more than 54,000 members, a workforce of 1000-plus staff, operate 47 stores in the North Island and 31 in the South Island and, based on recent trading, would have sales revenue in excess of $2 billion.

CRT chairman Don McFarlane said both co-operatives at management and board level were happy with the value and the benefits a merger would deliver and it was up to shareholders if it went ahead.

He said linking two co-operatives operating in either the South Island or North Island would provide national and commercial leverage and this had been confirmed by independent professionals.

"We are confident that the benefits and the commercial rationale are sufficiently compelling to take to shareholders to decide if the merger goes head."

Johnstone said shareholders would want the combined business to continue the good growth achieved by the co-operatives during the last five years and the next stage of the merger plans would be up to them.

"If we maintain and grow that and the synergy benefits come through as we have detailed they should be happy."

He said some parochialism was expected and this was a function of the passion which farmers had for their co-operatives.

Johnstone said the merger would bring scale so better returns could be made to shareholders.

A series of regional meetings with shareholders after legal documents are sent out will be held before the mid-February voting.

To proceed a 75 per cent majority is needed with shareholders receiving one vote for each share they own. A cap of 15,000 shares is in place at CRT so voting is not lopsided by larger shareholders.

McFarlane said the merger was a "knit rather than an overlap" with no plans for stores to be closed.

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A merger would ensure shareholders own a business with scale to compete in a specialised field, he said.

The merger would allow the Farmlands horticulture brand (Skeltons) to be rolled out in the South Island.

- BusinessDay.co.nz

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