PLANS by Avonmore Foods to create a food giant through a £600 million merger with Waterford Foods is likely to face strong opposition from some Waterford members.
While neither side revealed details of the proposals from Avonmore - which are in reality a takeover rather than a merger - it is understood that the terms value Waterford at over £210 million. However, Waterford shareholders would have little more than one-third of the shares in the merged group, which would have sales of £2.4 billion.
Any proposal would require the approval of 75 per cent of Waterford Co-op shareholders, who own two-thirds of the shares in the publicly-quoted food company.
This offer from Avonmore comes six years after a previous merger proposal collapsed. It would have given Waterford control of the merged group.
Since then the two companies have enjoyed contrasting fortunes, with Avonmore moving ahead strongly and Waterford suffering a series of setbacks.
Waterford Food shares jumped 20p to loop after yesterday's announcement. But the offer values them at 117p, based on the current Avonmore share price. Avonmore has not offered any cash to Waterford shareholders, but has offered to swap one of its, own shares for every two Waterford shares.
The offer, first indicated to Waterford on Thursday by Avonmore's chief executive, Mr Pat O'Neill, also promises higher milk prices for Waterford suppliers, and preferential representation on the board of the merged co-op.
It is understood that Avonmore has suggested that cost savings of around £20 million a year could result from the merger, through the elimination of overlapping businesses and the rationalisation of milk collection.
Industry analysts believe that this could result in the loss of at least 700 jobs over several years.
The boards of Waterford Foods and Waterford Co-op met in Dungarvan yesterday but took no formal decision on the offer. Another meeting is expected next week. It is understood that both meetings heard strong objections.
The Irish Farmers' Association, expressed a general welcome for a merger. But individual farmer shareholders and milk suppliers in Waterford and surrounding counties stressed their concern at the long-term implications for employment in both companies.
Although they hold a controlling share in Waterford Co-op, farmers were worried that their influence might be weakened. Sources said their attitude could be determined by proposals for the sharing of control.
One prominent former director of Waterford Co-op, Mr Cyril Power, expressed outright opposition to the Avonmore proposal.
The lack of detailed information caused considerable confusion in the farming community. The general reaction was to wait and see, while it was conceded that a merger could hold substantial short-term benefits for milk suppliers and co-op shareholders.
The ATGWU, which organises most of the workforce in the main Dungarvan plant, opened discussions with SIPTU and other unions to co-ordinate their efforts to safeguard employee interests.