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CI Times Weekly | Current Issue 262 | 04 August 2008

The PDL takeover - what can we expect?

Speculation about a takeover by CITC of rival company PDL (or merger with) has been met with a wall of ‘no comment’ from all players but has generated alarm in Government circles who are fast tracking a Commerce Commission Bill and Fair Trading and Consumer Guarantees Bill through Parliament next month.
Government’s move has been criticized as a ‘knee jerk reaction’ by the Cook Islands Chamber of Commerce. which has defended the move by CITC, but has offered no explanation as to the benefits, if any, to the public.
CITC is arguably the largest retailer in the Cook Islands but the takeover bid may be an indication that their groceries turnover has taken quite a beating from PDL which was formed with the friendly merger of Foodland, Meatco and Oasis Energy last year.
Acquiring the combined buying power and customer base of PDL Group and their associated outlets such as Muri Mart and Tangees would make them a very attractive target. What are the benefitsto PDL and what are the downsides for the staff and the consumer but nobody is talking!
The overseas experience is that private companies are often concerned about maintaining a level of secrecy or confidentiality because of possible negative reactions from the customers, employees, bankers or suppliers.
The better view is that nowadays most companies are conscious of the need for good public relations and how negative publicity can be influence customers to take their business elsewhere.
Theoretical advantages for a takeover
The Government is reportedly planning to table consumer protection laws next month, so in the public interest, we requested a copy of the proposed legislation from the authorities including Financial Secretary but to date, we are still waiting to receive a copy.
In the absence of any details, CI Times has researched the overseas arenas as to the usual economic theory of takeovers or mergers and once all the parties finally speak up, it will be interesting to compare the reality with the theory.
Synergy is where the combined company can reduce duplication of departments and operations in for instance, accounts, goods purchase, management staff, number of outlets. This is likely to reduce the wages bill from the downsizing of those departments.
Increased market share and increased revenue and thereby increasing its power to set prices and hopefully gain higher profits or at least hold down the overheads.
Economies of scale with increased buying power from increased size and bulk buying discounts
Reduction of transport, storage and warehousing costs by shipping direct to market from only one location rather than several sites. A spin off could be changing the use of a particular property or even to realize the capital value of property which may no longer be needed (ie by selling or leasing the excess property).
Resource transfer by combining scarce resources and perhaps reducing tax liabilities by buying a loss maker (if any) and reduce their tax liability (depending on the tax regime).
Unfortunately, the overseas experience shows that financial performance does not necessarily follow. There is a syndrome called ‘Empire building’ where managers have larger companies and hence wield more power but no real value gained for the company. There are also technological challenges where the buyer has one computer system while the target company has a different system which may be incompatible with the first. This could mean costly outlay of purchasing compatible systems or running two different systems within the enlarged company with resultant duplication of services. Another downside is that the manager’s overconfidence about the ‘synergies’ do not translate into reality from the merger and acquisition (M&A) but the outcomes cannot be undone.
For instance, the new enlarged company may find to their chagrin that key management or floor staff have left and have no intention of returning.
Potential downsides for consumers and staff
While many have been concerned about the lack of competition leading to higher prices than necessary (think airline fares prior to competition) and lower quality (who are you going to complain to) there is the immediate danger of job losses from reduced employment opportunities.
With less money circulating in the economy from fewer breadwinners in the workforce, it could accelerate the very condition Chamber of Commerce is complaining of namely a smaller customer base as more people leave our shores.
Monitoring ‘private companies’
The Government is reportedly planning to table Commerce Commission Bill together with a Fair Trading Bill in next month’s session of Parliament but what will they do in the meantime?
Reportedly the new legislation has been largely created by Melbourne based QC Charles Augustine Sweeny and it will be interesting to see the details because Australian consumer protection laws are very strict and companies that contravene the Trade Practices Act are pursued in a very robust manner by the Australian Competition and Consumer Commission (ACCC).
New Zealand Commerce Act 1986 aims to promote competition and prohibits conduct that restricts competition and the purchase of a business if that leads to a ‘substantial lessening of competition in the market place’.
The NZ Fair Trading Act 1986 was developed with the Commerce Act to encourage competition to protect consumers from unfair trading practices.
There are inherent difficulties in monitoring of private companies precisely because they are private, however, if our proposed legislation is anything like the Australian laws, then the proposed Commission may given the power wide powers including the power to issue ‘statutory demands for information’ with ‘virtually all businesses and the people behind them’ required to comply with the consumer protection laws.
Incidentally, Sweeny QC is the chairman of the NZ Commerce Commission and has stated on the official website that the Commission ‘must be left to do its work independently of government…and not be subjected to personal pressure to yield to the wishes of powerful and well connected companies or their powerful and well connected advisors.’

Headlines : Times 262 04 August 2008
-Approvals by Environment Authority may be illegal
- Rosie – CISNOC’S new Secretary General
- The PDL takeover - what can we expect?
- Research Association to hold second Conference
- The power of positive thinking

Headlines : Times 261 28 July 2008
- Incomplete EIA raises questions
- Rasmussen nominated for top Forum job
- Elikana appointed Solicitor General
- Wichman on renewable energy
- Big crowd at energy meeting

Headlines : Times 260 21 July 2008
- Sea cruises getting the ships to tie up
- Rarotonga to host Trade meeting
- Former ADB head passes away
- Teaching Te Reo Maori in Secondary Schools
- Extensive coverage of Olympics on CITV

Headlines : Times 256 23 June 2008
- Uncertain times ahead
- The Budget: Where the money comes from
- Sunday flights a concern to Aitutaki residents
- Consultant to advise on growing the offshore finance industry
- Community workshops on climate change issues

Headlines : Times 255 16 June 2008
- Cabinet meet to discuss Ui Ariki, Digicel
- No Jail time for Areai
- Proclamation by the Ui Ariki
- Dinner for the Woman of the Month
- Queens in camp for new launch

Headlines : Times 254 09 June 2008
- PM wraps up in Rome – heads for home
- Report card on Takitumu Lagoon Day
- Aere ra, Krystina
- Former boxers invited to provide support
- $47 million to upgrade water supply

Headlines : Times 253 02 June 2008
- Saving Aitutaki
- Tepaki Group committed to Maeva Nui sponsorship
- Takitumu Lagoon Day will show what you can do to help
- Tropikana-a sweet inspiration
- Landowner opposes Taakoka Villas application for reinstatement

Headlines : Times 250 12 May 2008
- High Court ruling will decide if Company can compete with Telecom
- HTTC students get a taste for the good life
- Cook Islands Community Services of Victoria Incorporated launched in Australia
- Lagoon Field Day on 6 June 2008
- 500 days to the Pacific Mini Games

Headlines : Times 249 05 May 2008
- ‘Mr Bankruptcy’ seeks new partners
- The contracting out option
- Cook Islands to feature on TVNZ
- Candles in the wind
- Airport commercial spaces the other side of the story
- Aitutaki wedding for Helen Henry and Prof John Hay

Headlines : Times 239 25 February 2008
- Mitiaro identity recovers well
- Government team developing website
- Business Leaders told profits are green
- Award dinner for Woman of the Month for February
- After 5 Business Talk at Club Bana

Headlines : Times 234 21 January 2008
- “It’s not a nice day.” –Tapi Taio
- Freak storm takes Raro by surprise, causes havoc
DPM seeks inclusion in Alcatel cable network with Samoa and other Pacific nations
- Search on for promising young boxers
- Women’s activist, Lynnsay Francis on brief visit home
- SENZ education founders not sitting on their laurels

Headlines : Times 232 24 December 2007
- Response by DPM to ADB loan upgrade reveals concerns
- Tumutevarovaro Games declared a resounding success
- Italian Assists Cook Islands Climate Change Agenda
- Concept for new Te Aponga logo decided
- The woes of Pacific Engineering Standards!
- Koutu Nui visit to First Nations in Canada

Headlines : Times 231 17 December 2007
- Takitumu Basketball Gold contenders disqualified over wrong colour shorts
- Political reform: are we taking the right approach?
- Award of Contract for the Rehabilitation of Avatiu Harbour Marina
- The new face at the helm of Cook Islands Nursing
- Christmas presents from the Indian community to Creative Centre
- Former agriculture research station in Totokoitu under dispute

Headlines : Times 230 10 December 2007
- A travesty of personalities!
- Maine Tiare girls at Competition Finale at Auditorium
- What is happening at the Punanga Nui?
- Cook Islands World AIDS Day 2007
- We still owe $54.8 million
- Boxing: Club competition set for 18 December
- Youngsters urged to take up boxing
- A Cook Island experience in China Final

Headlines : Times 230 10 December 2007
- A travesty of personalities!
- Maine Tiare girls at Competition Finale at Auditorium
- What is happening at the Punanga Nui?
- Cook Islands World AIDS Day 2007
- We still owe $54.8 million
- Boxing: Club competition set for 18 December
- Youngsters urged to take up boxing
- A Cook Island experience in China Final

Headlines : Times 229 03 December 2007
- Over $50,000 raised for Hosking family
- Industry ushers in new media council
- USP Pro Vice Chancellor upbeat on proposed International Campus in Totokoitu
- Forever young – the new 60s social club
- Audit Office reports busy year
- Appeal in land partition case – Privy Council only recourse after Court of Appeal decision?

Headlines : Times 228 26 November 2007
- $3,500 super nest egg disappears
- Finance Secretary continues to comment on indoor sports complex
- Manganese fever, the new gold rush
- Cook Islands given tourism destination rating of 69
- Tepaki Group host netball team
- A Cook Island experience in China Part II
- Te Mire Tarai Vaka parade

Headlines : Times 224 29 October 2007
- Asbestos to go to watery grave
- CISNOC President thankful that decision on Sports Stadium made
- Cooks NGO to commit to conference goals
- Cost of bread increases as of November 4th
- Leaders call for immediate action to protect region’s fisheries
- Rarotonga scooter club
- CICC celebrate Gospel Day with Nuku Religious Pageants
- Letter to the Editor: Health Ministry recruitment process
- Boxing Association begins promotion
- Auckland East Win Roller Mills
- Party to celebrate opening of new Ocean & Earth store at Turtles
- Oasis Hydroponics set to expand

Headlines : Times 223 22 October 2007
- Fiji, RAMSI, Pacific Plan main issues for PM at Leaders meeting in Tonga
- Takuvaine bridges in need of attention
- Man remanded back in custody
- Clemency celebrates her Masters in Health Practice & Nursing
- Commemoration of Te Rua-o-Te-Tonga Meeting House
- Ten minutes with Krystina Kauvai
- Blue Light Day at Te Atukura ready for Saturday night
- Koutu Nui to attend Climate Change meeting
- Days away from the biggest Conservation Conference for the Pacific
- Conservation Conference casts a wide information net

Headlines : Times 222 15 October 2007
- The CPU saga- Lets get back to the central issue-Cowan
- Delay in Police investigation into Rakahanga case
- Government has lost its focus-Marsters
- Pacific countries discuss Tuna Fishing Management Options for region
- Graduation ceremony for Midwifery Graduates at Public Health
- Public Health conduct October Tutaka to fight dengue
- 2008 Pacific Year of the Reef
- Experts help to develop policies

Headlines : Times 221 08 October 2007
- The CPU saga-the other side of the story
- British Crown may have a duty to Cook Islanders following 1950s A bomb tests
- Fast ferry a step closer
- Financial Secretary recommends upgrade of facilities for Mini Games
- AOG Conference in October
- Cook Islands to attend Lawn Bowls World Singles Champion of Champions
- Business Toolkits workshop opens new pathways for participants
- World Cup next for Sam Pera Jnr
- Good rankings for Sam Pera Jnr
- Power prices set to increase again

Headlines : Times 220 30 September 2007
- Manihiki medical emergency details
- Stop Press: 60kg of donated drugs dumped by Ministry
- Surveyor in beach saga explains his role
- Staff flee MFEM-why?
- Exactly what is our population and ethnic mix?
- Reception for French Naval Officers at Te Atukura
- French helicopter lands at Tereora
- Historical trip reunites families
- Woman of the Month Award
- A Letter Home
- SPREP works to combat invasive species

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