KEY POINTS:
International rivals could discredit a mega meat company formed by the merger of PPCS and Alliance by labelling it a monopoly, a sheep and beef farming leader has warned.
Keith Kelly, chairman of the Federated Farmers' meat and fibre producers' council, is the first meat industry leader to publicly flag the issue as a potential hurdle likely to arise from the amalgamation of two of the country's leading meat processors.
"The world will definitely try every trick they can to discredit it," said Kelly.
PPCS and Alliance announced last month they had engaged PricewaterhouseCoopers to investigate options that could help boost farmer returns, a move that has been widely interpreted to mean a merger is on the cards.
Despite a denial from Dunedin-based PPCS chief executive Keith Cooper, Kelly insisted the move suggested a step towards a union between the two companies.
However, he said despite the size of a merged meat giant, it was wrong to say it would be a monopoly since 75 per cent shareholder approval would first be needed, plus a stamp of approval from the Commerce Commission.
Although the resulting entity would control 43 per cent of the global trade in sheep meat, 60 per cent of New Zealand trade and between 80 and 90 per cent in the South Island, Kelly said it would just be the amalgamation of two large companies, leaving around 260 other domestic meat companies.
He said the because PPCS and Alliance are cooperatives, and not state owned, any merger would be a shareholder decision.
"So it's not NZ Inc saying 'though shalt' but individuals banding together to make a powerful company."
The call for the two companies - who have a combined turnover of $3.1 billion and 16,000 shareholders - to join forces comes amid accusations that exporters competing on price are responsible for poor returns to sheep farmers.
PPCS has already ditched its North American marketing arm in favour of a joint venture with New Zealand and Australian rivals, a move it is considering replicating in other markets including Europe and China.
Kelly's warning of the challenges a Fonterra-of-meat could face internationally follows the Government's decision to loosen the dairy giant's exclusive rights to export quota markets in an effort to prove it was not a monopoly to European politicians and regulators.
