One more hurdle to be jumped
A heavyweight merger between CRT and Farmlands into a $2 billion-plus rural services business seems almost a formality after shareholders gave it the initial nod this week.
By the end of the first round of voting, CRT shareholders were 85.5 per cent in favour of the merger at a Christchurch meeting on Tuesday and Farmlands turned around some director division after its shareholders registered just over 82 per cent approval at a Hamilton meeting.
The first vote was successful in exceeding the needed mark of 75 per cent support and sent a strong signal the merger would proceed.
This would place the merged co-operatives close to the top of rural service trading with rivals Fonterra's RD1 and PGG Wrightson.
The merged co-operatives would have 54,000 members, more than 1000 staff, 47 farm supplies stores in the North Island and 31 in the South Island, with combined sales of more than $2b a year.
Farmlands shareholders appear to have shrugged off doubts raised by resigned directors, Charlie Pedersen and Hugh Ritchie, who condemned the merger proposal in the belief it was not in the best interests of Farmlands' members.
CRT chairman Don McFarlane said he was pleased with the outcome.
''It was a positive statement from the shareholders when you consider the threshold we had to overcome, and in both islands it was a clear mandate to proceed.
"We still recognise the rules and formalities require us to hold a second vote and we are continuing to talk with shareholders and it's not a done deal until we get all the ticks in the boxes.''
Farmlands chairman Lachie Johnstone said he was pleased with the way that shareholders had seen there was real value in the proposal.
McFarlane said the result meant that less than 3 per cent of the total shareholder base had voted against the merger idea.
This amounted to a strong mandate to proceed, he said.
About $38 million is expected to come in the first three years from better buying, national coverage and overhead savings.
Merger costs were expected to absorb benefits in the first year, but, by the end of the three years, an extra $18m a year is expected from combining the businesses.
CRT has gone through four or five mergers and since the last amalgamation eight years ago its sales and profits have increased fourfold and rebates to shareholders have strengthened threefold.
The CRT shareholder base has gone from 18,000 members to 26,000 and turnover has risen from about $380m to $1.2 billion.
The merged co-operative is expected to be led by Farmlands' Lachie Johnstone as the new chairman, McFarlane deputy chairman and CRT's Brent Esler chief executive with initial directors split evenly between both co-operatives.
McFarlane said that, subject to a follow-up vote by shareholders on February 27, a merger would proceed on March 1, and begin a process of unlocking benefits to shareholders.
In the second vote by shareholders of both co-operatives on February 27 the voting will need to reach 50 per cent support. For CRT this will be held in Invercargill and Farmlands in Palmerston North.
MERGER FACT BOX
- In the top three for rural service trading
- 54,000 members
- More than 1000 staff
- 47 farm supplies stores in the North Island and 31 in the South Island
- Turnover of of more than $2b a year