Crunch time for UFC

30 Jan, 2008 09:00 PM

UNITED Farmers Co-operative (UFC) has released details of its proposed merger with heavyweight New Zealand fertiliser co-operative Ravensdown, ahead of a critical shareholder vote next week.

Ravensdown is New Zealand’s largest fertiliser supplier, supplying Kiwi farmers with enough fertiliser to equal the size of WA’s market, and is considered a neat fit with UFC because of a strong co-operative culture.

It has 30,000 members and generates over 1.5 million tonnes of fertiliser sales each year.

Ravensdown also has the capacity to bring its bulk fertiliser to WA using its ships that pass west coast ports on their ways to New Zealand.

UFC was forced to look at merger discussions late last year after its position in the local fertiliser market came under serious threat, with another loss expected this year, higher than the $3.6million deficit it posted seven months ago.

UFC chairman Bowe Wilson said the WA-based co-operative, which started in 1992 and now boasts in excess of 3500 members, had struggled to make a profit after two tough seasons of prolonged drought.

Its position was made significantly harder when the price of fertiliser doubled during the same time as international supplies plummeted on the back of burgeoning demand.

Shipping rates have also increased dramatically in recently.

The two parties entered into exclusive discussions in November after UFC, WA’s third-largest player in fertiliser with a 15pc share, behind CSBP and Summit, considered a number of potential partners, including Summit, ABB and CBH.

The proposed merger will now be considered at UFC’s Annual General Meeting on February 7 at the co-operative’s head office at Rous Head in North Fremantle.

A merger agreement has been entered into by the board of directors and is now subject to 75pc approval from UFC shareholders.

Ravensdown staff has also been in WA during the past two months assessing UFC’s business practices and preparing for any problems with the prospective takeover transition.

Reaction to the move has been largely positive.

Mr Wilson said the only downside to the transaction would be if it didn’t go ahead.

“The overwhelming impression we have had so far from speaking to our members is that they are very supportive of the merger and not one person has spoken negatively about it,” he said.

“Some hard questions have been asked by our members and they clearly understand the reasons for the deal and the likely benefits of it.”

UFC’s board is recommending its members vote in favour of the merger.

If the merger is successful, UFC will become part of the Ravensdown Fertiliser Co-operative and members will own a share of the merged entity’s operations.

Ravensdown plans to keep trading under the United Farmers name in WA, subject to regulatory approvals.

Two representatives from WA would also be appointed to the Ravensdown board, allowing UFC members to maintain a voice in the new entities’ management.



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