Pounds 2.5bn dairy merger in balance on eve of vote

THE decisive final phase of the attempt to merge Avonmore Creameries and Waterford Foods into one massive dairy conglomerate …

THE decisive final phase of the attempt to merge Avonmore Creameries and Waterford Foods into one massive dairy conglomerate will begin on Friday at mass meetings of shareholders of both organisations.

It will be a knife-edge, two-stage voting process. For the merger to succeed, 75 per cent of those farmers present and voting at each of Friday's meetings must endorse the merger resolution, and this outcome must be confirmed by similar majorities at further separate polls two weeks later.

The crucial meeting next Friday will be that of Waterford Co-op shareholders in an IDA advance factory on the Cork Road, Waterford. While the Avonmore shareholders are to meet and vote simultaneously in Kilkenny, their endorsement for the merger is believed certain.

Not so the Waterford vote, which is still believed to be in the balance in spite of a massive campaign by both managements in recent weeks urging support for the proposal.

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Waterford Co-op has about 5,000 shareholders, of whom some 2,000 are Co Waterford-based farmers, with 2,000 in Co Wexford and 1,000 in Co Cork. Waterford management expects an attendance of around 1,500 at Friday's key meeting.

If either of the two resolutions fails, the merger will be off. If they pass, a further special general meeting will be held on July 25th to confirm the result in yet another poll.

The Avonmore offer is valued at Pounds 378 million, based on an Avonmore share price of Pounds 2.80. The combined business of the two groups would be worth Pounds 2.5 billion.

As well as an improved milk price, the merger proposal offers substantial share bonus incentives to the members of both co-ops. These amount to about Pounds 90 million in free shares.

But the quid pro quo for the milk price commitment and the free shares in the enlarged co-op will be a reduction in the co-op holding of the plc by 16 per cent to 55 per cent, and there are many who see this as an unacceptable erosion of former control. A farmer correspondent asserted in a letter to the Farmers' Journal this week that "it may well herald the end of farmer control of milk-processing in Ireland."

Also militating against the success of the merger is the ingrained county rivalry between Waterford and Kilkenny.

And finally, among Waterford Co-op members, there is a deep underlying dissatisfaction with, and criticism of, the performance of their management, which has weakened the organisation in recent times. What the Farmers' Journal called "the nagging, doubts of a group of good farmers" could still be a decisive factor.

The last time an Avonmore-Waterford link-up was proposed and voted on six years ago it was roundly defeated. The vote will be closer on this occasion, especially in the light of the tempting milk price commitment and bonus' offers, but it is by no means a foregone conclusion.