Avonmore boards to meet over rejection of offer

THE boards of Avonmore Foods and Avonmore Co-op will hold crucial meetings next Monday to decide on a response to the rejection of the merger proposal by Waterford Co-op. Avonmore chief executive Mr Pat O'Neill would not be drawn on the likely outcome of these board meetings or on whether Avonmore will increase its offer for Waterford to make it more acceptable to the Waterford board.

Speaking after the group's annual general meeting in Kilkenny yesterday, Mr O'Neill repeated that any proposal from Avonmore will not go ahead without the support of the Waterford board and there is no question of Avonmore taking its merger proposal directly to Waterford Co-op shareholders. He added that, at a series of meeting with Avonmore Co-op share-holders in recent weeks, there was not a single dissenting voice against the proposal to merge with

Waterford.

At the meeting, Mr O'Neill restated the case for a merger and why the Avonmore board took the decision to make the approach to Waterford. Free trade post-GATT, the reform of the Common Agricultural Policy, the onset of monetary union, stronger international competition and the growing power of the major multiples, were all factors dictating the need for rationalisation of the sector, he said.

Mr O'Neill emphasised that in recent weeks, the two biggest New Zealand dairy co-ops had merged to create an enlarged group with a cost base in skim milk powder production "a fraction of that in Ireland and the UK".

This merged New Zealand co-op processes more milk than the entire Irish milk quota, and has completed the largest cheese factory in the world - five times the size of the largest Irish cheese plant. In the US, there is talk of a merger between Mid American and AMPI which would create a group with a milk pool of four billion gallons, four times the entire Irish milk quota.

In his first public comment on the merger proposal which would give Avonmore two-thirds of the merged business with Waterford, Mr O'Neill said that the proposals on milk price were attractive while the representational structure ensured the retention of farmer control of the merged group.

"Waterford do not believe our proposals reflect the underlying value of their business. Our board will meet next week to consider the situation." In the meantime, Avonmore is expected to have detailed consultations with its main advisor, IBI Corporate Finance.

Asked what Avonmore's strategy would be if the Waterford merger proposal is ultimately abandoned, Mr O'Neill said: "We have made no secret of the fact that we want to be the biggest meat business in the UK, be the number three player in liquid milk in the UK and increase the size of our cheese business in the US.

"But I am certain there will be rationalisation by whatever route. There are too many operations in meat and dairy. We have probably initiated a process, but we can't be in every race," he said when asked whether Avonmore might look for another merger partner if the approach to Waterford fails.

Speaking on the decision of the Minister for Agriculture, Mr Yates, to ask the Competition Authority to investigate alleged cartels in the meat industry, Mr O'Neill said he welcomed such an investigation. "For a long time there has been innuendo of alleged cartels, there is no question of a cartel in the meat industry," he said.

"Meat factories have become a convenient scapegoat, and if there is a cartel, it doesn't seem to have worked very well. We have lost a bit of money in our meat business in the first quarter of this year when we made money in the first quarter of 1996 despite live cattle exports and the impact of BSE."