Senior management for CRT and Farmlands expect gains of $38 million will be made from the proposal to merge them into a $2 billion rural services business.
The extra income over three years would come from combining better buying, savings in office and information technology, and sharing the best of services.
A merger would allow the Farmlands horticulture brand (Skeltons) to be rolled out in the South Island and CRT's finance offering, bulk fuel delivery and feed and seed products would be extended to the North Island.
Farmer shareholders will have the final say on the merger proposal when they vote in mid- February after regional meetings.
For the merger to go ahead, 75 per cent of shareholder votes will need to be in favour with one vote received for each share they own.
A merged business would be near the top of the big three of farm supply businesses, rivalling PGG Wrightson and the Fonterra-owned RD1.
The combined business would have 54,000 members, 1000-plus staff, 47 stores in the North Island and 31 in the South Island. It was expected there would be sales revenue of more than $2b.
Shareholders are digesting a letter from CRT chairman Don McFarlane and Farmlands chairman Lachie Johnstone, outlining the proposal.
McFarlane said the letter had explained the benefits for shareholders of a merger and it would only proceed if they passed special resolutions during the voting.
He said outside experts had confirmed its commercial advantage from extra buying power and leveraging from a nationwide business in farm supplies.
"So far the feedback [from shareholders] has been pretty good and I don't think there will be any great surprise in the strategy.
"But people have to be satisfied the homework has been done and the commercial case is sound."
Some criticism could be expected. But both co-operatives had a history of working closely with their shareholders, he said.
Johnstone said management had presented a good proposal to the shareholders who would make the final call.
He said a critical factor in favour of blending the co- operatives was the lack of business overlapping.
Should the merger proceed, Johnstone will be nominated as the founding chairman and CRT chief executive Brent Esler will have the operational duties.
McFarlane said he accepted he would lose his chairmanship and was committed to getting the best result for shareholders. CRT had to move in the same direction as many mergers around the world to remain competitive. Should the merger fail CRT would proceed as usual, he said.
Initially the branded Farmlands and CRT stores would continue.
Later they would transition into the Farmlands brand nationally as it removed confusion with the unrelated CRT brand in Australia and another unrelated company that traded in Northland 20 years ago.
- © Fairfax NZ News
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