Dairy merger creates NZ's largest company

By CNN's Grant Holloway

WELLINGTON, New Zealand (CNN) -- New Zealand's largest company has been formed Monday following the merger of two major dairy groups.

More than 80 percent of New Zealand's 14,000 dairy farmers voted to form GlobalCo, a milk-products operation which will process and market about 95 percent of the nation's output of milk, cheese, yoghurt and other related products.

The new group -- formed by the merger of Kiwi Co-operative Dairies and the New Zealand Dairy Group -- will be one of the top 10 milk-product businesses in the world.

Dairy products are New Zealand's single biggest export earner and account for about 7 percent of the nation's gross domestic product. The industry produces over 1.5 million tonnes of dairy product a year, second only to the combined output of the European Union countries.

New Zealand Dairy chairman Henry Van Der Heyden said Monday the merger gave the companies the scale and global influence they needed to continue to succeed and prosper.

Top five ranking target

"Our shareholders have taken a bold step today to secure the long-term strength and success of their business," he said.

Chairman of the new company, John Roadley, said he wanted to see GlobalCo become a top-five dairy company in the next few years, a target that would require the group to lift output by 20 percent.

Roadley said the merger was necessary for New Zealand farmers to compete effectively in an increasingly globalized marketplace.

"The Economist predicts there will ultimately be just 10 major food retailers in the world," he said in a recent speech.

"Customers like that want to deal with suppliers of similar scale. We, the suppliers, must have scale to have leverage with such huge customers."

The new company, which has the political support of the New Zealand government, will be worth about $5 billion (New Zealand $12.5 billion) -- twice the size of nearest rival New Zealand Telecom.

Government support for deal

New Zealand's agriculture minister Jim Sutton said Monday the government would introduce a bill to parliament Tuesday to allow the restructuring to go ahead.

In other dairy news, a proposal to restructure Australia's Dairy Farmers Cooperative -- one of that nation's big three milk companies -- with a view to a public float, has failed to win enough support.

Dairy Farmers needed a 75 per cent majority for the proposal to succeed, but only gained 63 per cent in the vote, finalised at the weekend.

Dairy Farmers chief executive officer Allan Tooth said the organization could still move ahead despite the vote, but at a slower pace.

"We're a very strong business, we have market leading positions in milk, in cheese and yoghurts and we have a very bright future," Tooth said.