The submission maintains Fonterra’s bid was not the highest or best, and “significant pressure was placed on NZDL suppliers to accept the Fonterra proposal...”.
It alleges Fonterra insisted on all suppliers signing, effectively tying them to Fonterra for seven years “...which is clearly anti-competitive and is outside the normal contract whereby suppliers are able to [annually] withdraw from supply to Fonterra...
“We understand the NZDL farmers are required to purchase shares in Fonterra with a value of approximately $45-$50 million... Thus in reality the suppliers will have to buy their own company and the net cost to Fonterra is effectively zero.
“As a contrast the [submitter’s] offer did not require suppliers to acquire any shares linked to supply but did offer a board position for a supplier representative and offered a voluntary opportunity for suppliers to purchase shares in the company.”
The submitter also maintains Fonterra did not pursue the acquisition but was “approached and almost cajoled into buying the company.”
“This suggests that the receivers [BDO] may not have conducted a fair process but rather one that was predetermined in favour of Fonterra despite the presence of higher competing bids.”
The submitter’s bid would have “returned a much higher price to the receivers and therefore would have ensured full repayment to suppliers,” it subsequently adds.
The submitter also says a letter from law firm Buddle Findlay advised the bid was “not preferred as the view was that the bid would require Overseas Investment Office (OIO) approval.”
Who Buddle Findlay was acting for is not clear. Receiver BDO didn’t answer Dairy News’ questions as to whether it had engaged the firm, or whether Fonterra’s bid was the highest and whether OIO involvement had been a consideration in the decision process.
“The receivers are subject to confidentiality obligations in relation to the bid process and the conditional agreement with Fonterra,” BDO partner Stephen Tubbs responded.
However, he did defend the bid process. “The receivers are confident that the sale process for NZDL’s assets was robust and secured the most creditable and attractive outcome for the creditors [secured and unsecured, including farmer] of NZDL.”
As to whether BDO had initiated contact with Fonterra, or vice versa, Tubbs said that to ensure as competitive a process as possible the receivers “took all reasonable steps to ensure that all potential bidders were aware of the opportunity to bid for NZDL’s assets.”
The commission will rule on Fonterra’s application at the end of this month.
