Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

authored by: Paul Ingenbleek Peer Ederer Joy Christensen

22 August 2007

2007 Wageningen University --- EFAS All rights reserved. Cases are developed for discussion only, and are not intended to serve as source of data. No part of this publication may be reproduced, stored, transmitted or used without permission of Wageningen University.

acknowledgement The authors thank Coen Borren, Gert van Dijk, Doeke Faber, Timo Huges, Jo Wijnands and Emiel Wubben for their constructive comments and openness, and Laura Jager for research assistance.

editing International Meeting Point, Joy Christensen (jjss@c.dk) layout Grafisch Atelier Wageningen, Jeroen Brugman (www.gaw.nl) print Print Service Ede (www.printservice-ede.nl)

Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Dubai, United Arab Emirates

Built for the future, Dubai World Central International Airport (DWCI) will have an annual cargo capacity of 12 million tons, i.e., more than three times that of Memphis, the world's largest cargo hub today and a passenger capacity of more than 120 million, almost 50% more than Atlanta, currently the world's busiest passenger airport. Dubai World Central International Airport is designed to handle all aircraft of the next generation, including the super jumbo. Up to four aircraft can land simultaneously there 24 hours a day, minimizing in-air queuing. The first runway is expected to open in 2008, the whole airport will be in full operation by 2017. The new airport infrastructure includes: six parallel runways, 4.5 km in length three passenger terminals 16 cargo terminals parking space for 100,000+ vehicles Today's Dubai International Airport (DIA), 40 km from the future DWCI, handled 4.3 million passengers in 1988 and 9.7 million in 1998, then 18 million in 2003, and is expected to reach 60 million in 2010, which will be more traffic volume than at any European airport except London Heathrow. Amsterdam Schiphol plans for 50 million passengers that year.

The First Hurdle Taken

It is early morning, midweek in August 2007 at Aalsmeer, Netherlands. Timo Huges, CEO of the cooperative flower auction Aalsmeer VBA, the world's second largest flower auction, steps off the elevator on the way to his office. In a glance through the hall window onto the auction floor, he sees the long trains of carts pulled by tuggers trolleys passing below with some of the 9 million flower stems and 2 million plants that go through the auction compound this morning. His secretary walks in with fresh coffee, saying that Financial Director Rens Buchwaldt wants to speak with him. "At last!" he says. And a short conversation later Huges has the anxiously awaited confirmation from Buchwaldt that the Dutch market regulation authority (NMa) has approved the merger between Aalsmeer (VBA) and its head-to-head competitor Flora Holland (FH). "One hurdle taken, another lies ahead," Huges thinks to himself, listening to details of the NMa approval of the merger plan. Over the past years, rival FH has become the world's largest flower auction company, created through a process of smaller mergers and takeovers among regional Dutch competitors of VBA. The result of the ultimate merger between FH and VBA will be a single Dutch flower auction company with turnover of almost 4 billion euros, 98% share of the domestic auction market, and 40% of the European market, with Huges as the designated CEO of the merged company.

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Facing the Forces of Disintermediation

During the next weeks, Huges' attention will be devoted to the forthcoming meeting in September 2007, at which the cooperative members and auction owners will vote on the plans. Huges has less than a month left in which to convince a sufficient number of the 3000 VBA members that this merger is the best way to respond to structural changes they face in the flower business. These structural changes are a threat to the Dutch flower auctions and with that to the prosperity of the whole Dutch flower industry. Two ever stronger forces of disintermediation are at work. One is globalization, the other is consolidation both leading to and caused by the rise of direct bulk buying by large retail chains. After careful deliberation, top management at FH and VBA became convinced that a merger of their operations is the best way forward, if the Dutch want to maintain leadership in the flower trade. But there are many hurdles to clear for a successful merger. Obtaining NMa approval was the first step in the process; obtaining approval from the cooperative members in September 2007 is the next. The real challenge will only come then: the auctions have essentially pledged to the community that they will be a preeminent generator of competitive advantage for the Dutch growers in a fast changing world. Keeping that promise will be key to the viability of the auctions. If this newly merged giant auction company does not live up to the promise, it will weaken the entire Dutch flower industry. Growers and buyers alike would abandon the auction system one by one, opting for other trading channels and setting in motion a vicious cycle of diminishing importance. No other auction would be left to fill the gap, should the merged flower auction company fail to perform. Timo Huges, the auctions, and the entire Dutch flower industry are irreversibly entering a new world of flower growing. Before taking the position as CEO at VBA Aalsmeer, Huges made his career in the freight forwarding and logistics industry with the international transport company Frans Maas. There he was employed since he completed his business administration studies at the University of Groningen. He started a new subsidiary of Frans Maas Transport in the UK and occupied several positions in marketing and sales before he reached the position of vice president in that company. With a career background in logistics, Huges knows only too well how important the transportation infrastructure is in facilitating trade, commerce and industry. Few examples could illustrate the intimate relationship between sophisticated distribution systems and the welfare of an industry better than the symbiosis of the Dutch flower industry and its auction system, which together have dominated the European flower industry for centuries. But, globalization is about to put the system to a test.

Disintermediation threat to the auctions posed by globalization The Dutch flower industry faces seismic shifts on several fronts, for instance in cultivation, transportation and communication technologies. But foremost, a historic shift in trade patterns is underway. For as long as anyone can recall, the world's flower industry has been divided among three blocks: the Americas, Europe, Asia. In each of these blocks there is

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

one large and affluent buyer of high quality flowers (respectively USA, Western Europe, and Japan) surrounded by a number of secondary markets. Each block has its own historically evolved trading patterns (Exhibit 2 for market sizes, trade flows, production figures). In the American block, wholesalers occupy a central position, sourcing flowers mostly from domestic growers or South America. Miami is the central logistic hub for imported flowers, distributed from there to various consumption centers throughout the USA. Japan is also a largely selfsufficient market with its typically multi-layered distribution and wholesale system, sourcing any gaps with imports from the tropical countries to its south. India and China each have a large domestic demand for flowers, which in both countries is supplied from lower quality domestic production. Unique to Europe is the largely export-oriented Dutch flower industry and its auction system which supplies high quality flowers across the continent. Over the past years, each of the high-quality markets has attracted steadily increasing amounts of flower imports from southern regions, respectively from Latin America, Africa, and South East Asia. However, these south-to-north trade flows have tended to integrate seamlessly in the established production and distribution systems of these three blocks, causing only limited systematic changes. In many instances, the growing operations in the southern regions are in fact the diversified interests of growers from the north. This arrangement may come to an end in the foreseeable future though, and for three fundamental reasons: . Rising economic and political stability coupled with improving technological and managerial competence in southern or tropical growing regions are boosting their competitiveness. (Exhibit 3 provides an overview of the production countries and Exhibit 4 shows a cost comparison Kenya and the Netherlands; Exhibit 5 shows crop value by planted area for comparison of productivity among the world's main flower growing countries.) 2. The four BRIC nations (Brazil, Russia, India, China) are emerging as powerful consumption centers of high quality flowers. China and India are also becoming more export-oriented. Thus these nations will be creating large trade flows in both directions. 3. Transportation and distribution costs are likely to fall further, relative to the final value of the flower. The upshot of all three trends is: flower trading will soon flow in more directions than only South > North. Substantial flows may develop from Asia to Europe and USA, from Africa to the Americas and Asia, or from Europe to everywhere else all of them trade flows which up to now have been fringe phenomena. These emerging trade patterns of course do not apply to flowers alone. They explain the astounding growth rates which entrept centers currently experience, such as the radical growth at Dubai and as Dubai expects, this is only the beginning. The superlatives which attest to its rise have trumped one another continuously: the world's highest building, most expensive hotel, largest indoor ski slope, also the largest sea reclamation projects, the largest container seaport, the world's largest airport, and yes, Dubai has opened a flower distribution center too, with an ambition to match (Exhibit 6).

1 Entrept centers are countries that serve as transit shipment centers for goods exchanged between two other countries.

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

So far, not much flower business has been happening in Dubai, and most Dutch experts doubt that it will ever be a serious competitive threat to the Dutch flower distribution system. And yet, says Doeke Faber, chairman of the association of flower auctions: "If we just let it happen, then the production of the new growing regions will not be organized through our auctions. This would be a tremendous waste, because the auctions have much to offer. Any other mechanism to broker the daily supply of 14,000 different highly perishable products and break bulk from grower to retailer would be less efficient."

Disintermediation threat to the auctions posed by consolidation The headline of a flower industry journal early in 2007 reads alarmingly: "Retail battle creeps onto growers' doorstep".2 With structural changes and the pressure of cost reduction, marketing channels are evolving into roughly two groups: Mainstream: such are flowers and plants produced in large quantities and sold as simple bouquets at supermarkets and garden centers. For instance, the share of flowers bought at supermarkets in the UK is at 64% by far the highest in Europe.3 Large retail chains such as Tesco and Waitrose have discovered that the sale of flowers on a large scale enhances their store environment and quality image. Specialty: such are flowers of very high quality, or plants sold in artistically designed bouquets by florists. Those flowers may be delicate, so they may need special care during distribution, which is something that the standardized retail supply chain cannot afford. Large retailers press their upstream partners to reduce costs, which is primarily achieved by economies of scale, giving rise to Dutch companies with flower production areas larger than 5 hectares, and in African countries even larger than 00 hectares.4 These owners are sometimes described as "the new captains of industry in the Netherlands", and many flower growers who retire, sell their companies and land to those larger scale producers. To further reduce the cost of labor intensive cultivation, companies are moving production to countries in East Africa like Kenya, Uganda and Ethiopia.5 Thus, the flower grower sector that traditionally produced "average" qualities for "average" outlets is declining in size. The total number of growers selling through VBA has been dropping for years (34% p.a.). Exhibit 7 gives figures on the gradual consolidation of trade among growers and buyers who trade through VBA and FH.

2 A. Evans (2007) Retail battle creeps onto growers' doorstep, FloraCultureInternational.com 3 Share approx. 15% in other major markets like France and Germany (J. Wijnands 2005, Sustainable International Networks in Flower Industry: bridging emperical findings and theoretical approaches, Int'l Society for Horticultural Science, Leuven, Belgium) 4 One hectare (ha) is 10,000 square meters or 2.47 acres. 5 This was greatly enabled by the MPS certification scheme, introduced by the auctions in 1995 to guarantee satisfactory environmental and social practice by all growers and protect intellectual property rights with tracking and tracing systems.

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

There is a corresponding development of consolidation among wholesalers. One example is the Dutch Flower Group (DFG) selling cut flowers and potted plants to the larger retailers. It includes 2 formerly independent companies, each with a different core business: sourcing from various countries, wholesaling activities like bulk breaking, stock replenishment at supermarkets, and bouqueting for added value. The German flower wholesaler association BGI expects the number of German wholesalers to drop from 500 to 300 and that 60% of the trade will be in the hands of a few large companies.6 Wholesalers that have no direct entry to large retailers must focus on the high quality specialty end of the market, where they might find profitable niches to dominate. The flower auctions are facing a three-fold challenge due to globalization and consolidation in the industry: . Wholesalers as well as flower growers catering to large retailers pass on their cost reduction pressure to the auctions, bargaining for discounts on the uniform tariffs. The wholesalers play the auctions against each other, or they lure larger growers into direct contracts. Direct streams exist in particular between the UK supermarkets and large growing companies in Kenya. 2. Increased flower production in East Africa puts pressure on a distribution system that physically delivers flowers to the Dutch auctions and onward to final destinations. Logistic centers elsewhere in the world might reduce overall transportation costs and reduce precious delivery time for perishable flowers. 3. Buyers are increasingly attracted by remote buying systems that hold electronic auctions with digital images posted on websites showing the flower or plant online. The physical whereabouts of the flowers could be cold storage in Munich, London, or Dubai or anywhere else. During 2006, electronic auctioning doubled in volume, and VBA estimates that its share will increase to 80% within ten years.

The merger as the answer The line of argument for merging VBA and FH in response to disintermediation trends runs like this: In the short term, investing in standardization of distribution and payment systems will pave the way for reduction of overhead and decrease in transaction costs. Also, a single auction company will provide greater market opportunities for the growers and increase the assortment for buyers. In the long term, larger volume will equip the auction company with the investment capital to open hubs abroad (with or without local partners) and to invest in remote buying systems. The company will also be better equipped to invest in real estate to make it attractive for large wholesalers to establish operations close by instead of abroad. In conclusion, the management has argued both to NMa and to growers that the merger will enable the Dutch flower growing industry to compete more effectively in globalized markets the merger enhances rather than diminishes competition. (Exhibit 8 for the quick summary of the merger proposition in the original Dutch language)
6 A. Evans (2007) Wholesalers working to win direct import, FloraCultureInternational.com

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

A Day at the Auction in Aalsmeer VBA

Day-to-day business in Aalsmeer shows few signs of the high level strategic developments under discussion. In the late afternoon, domestic growers load trucks with flowers and plants and send them on their way to Aalsmeer. At about the same time, planes arrive at nearby Schiphol Amsterdam airport with flower and plant imports from something like 00 other countries. During evening hours the fresh produce is unloaded from trucks and taken to storage in refrigerated rooms. Here, flowers are sorted and grouped in similar types. A raffle determines the sequence in which the batches are auctioned. Next, the products are inspected by an appraiser who will pass his quality and reliability evaluation on to the buyers. Buyers frequently visit the storerooms to see, feel and smell the produce. Cut flowers and pot plants are "experience products" the ultimate value is determined by consumer emotions. A quick trip to the storerooms is no problem for most auction buyers, because they have offices and distribution centers in the near vicinity. The importance of physical proximity led to "Mulder's law" (named after a former CEO of VBA and followed by his successors). It says that internationally operating wholesalers can only be attracted to the auction, if the company invests heavily in real estate nearby, and offers favorable conditions for wholesalers to establish themselves. Around 4,000 botanic varieties are currently traded here, with a high degree of product innovation. Coen Borren, head of marketing and information at VBA, remarks: "For a traditional product like a rose, 30% of sales consists of product types that were only recently introduced to the market." Batches contain well known products like roses, lilies and tulips in various categories of quality, but also niche products such as matricaria. That very small flower, produced by no more than three growers, is often used in high quality bouquets. Most batches contain flowers and plants of one type, some consist of combinations or simple bouquets. Parallel to bouquet processing by florists and trade channels closely connected to large supermarkets and garden centers, growers increasingly offer simple bouquets or other added value products at the auction. This way, buyers can purchase a "ready to sell" product straight from the auction site. Trading starts at 6:30 a.m. and runs to about 0 a.m., which leaves the rest of the day for the transport of produce to new owners (or even a sale to end consumers). The mechanism most frequently used for trading is the auction clock, of which VBA has 3 (nine for cut flowers, four for pot plants). Up to 350 buyers can be seated in each of 5 auction rooms that look like university lecture halls. On projection screens at the front of the room clocks tick down rapidly, while a seemingly endless line of trolleys loaded with batches of flowers and plants pass through the arena. The auction clock starts at a high price, determined by an auction manager on the basis of prices that were bid in the past. At high speed it ticks down until a buyer willing to pay the price presses a button and buys the batch. Trolleys laden with produce pass through in rapid succession every few seconds another purchase is completed. During an average morning, 60,000 transactions are made this way in Aalsmeer auction rooms. (Exhibit 11, back cover for illustrations)

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

As soon as a purchase is made, the produce travels by trolley to the loading ramps where trucks are waiting to carry the goods to destinations close by or to the airport. Every day, about 200 persons working in shifts are occupied with transport preparations the process has to be as time efficient as possible because cut flowers lose approximately 5% of their value in just one day.7 By mid-morning, most of the flowers and plants have been moved from the hall. An advanced barcode tracking and tracing system makes all purchases traceable throughout the distribution system. Most of the plants and flowers stay within a radius of 500 kilometers: Germany, England, France, Scandinavia, Italy, Spain, Russia, and Eastern Europe are the main destinations. While hectic activity fades in the auction rooms and distribution halls, direct trade operations remain busy for the rest of the day. In addition to the clock mechanism, auction companies also mediate the sale of large batches of flowers in direct negotiation between growers and buyers. A single person began doing this at FH in 972. Initially, it involved future trades, buyers purchasing a claim for deliveries at peak periods such as Valentine's Day and Mother's Day. Because futures provide a greater certainty of the delivery time and available quantities, this service became increasingly popular. Now 60 employees are engaged in that kind of auction business at FH, and about 30 at VBA. Already about 25% of the transaction value at the auctions is handled by these direct trade intermediation services, and growing steadily (Exhibit 9 for an overview of transaction volumes by product category and transaction type). The administrative department also stays busy for the whole day. The auction companies charge both growers and buyers for their services: buyers pay about 20% of transaction related auction costs, growers 80%. The cooperative members pay a contribution which varies from .6% to 2.3 % of the sales price. Non-members pay a higher percentage. In addition, non-members pay something for each transaction, just like the buyers do. The buyers pay a service fee of about 0.% of the purchase price to the auction company in addition to a fee for each transaction. Coen Borren explains: "If they purchase smaller amounts they have the advantage that they don't need to break the bulk themselves and don't need to make bouquets. We however have larger costs, because we need to split one trolley over ten buyers rather than sending it to one buyer. Hence, if they buy through the clock they pay for each transaction."

7 A. Evans (2007) Disconnecting the product from the process only the beginning, FloraCultureInternational.com

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Connecting Supply and Demand

Beneath the surface of day-to-day auction activities, the auction companies play several different roles in connecting supply and demand. First, logistics: most immediately visible is the logistic function. Flowers are brought to the auction compounds and distributed from there to the buyers' premises. Second, price maximization: the auction companies fulfill a price maximizer role, because like a spot market, the auction clock serves grower interests. It reduces the bargaining power of buyers who principally have time on their side when trading perishable products. Third, bulk-breaking: as auctions break bulk deliveries, they help growers to increase their scale. Starting with the daily output of a medium-sized, 2 hectare production, the agricultural economist Jo Wijnands illustrates why. "As a rule of thumb, every square meter in a flower growing company produces one flower every day. This means 20,000 flowers a day, generally of one kind, from 2 hectares. Now consider that there are also growers that have 30 hectares. Such amounts will be very difficult to sell to a single wholesaler." Fourth, financial intermediation: the auction companies fulfill an important monetary function. They often handle all financial transactions for their members. Even growers who may never make use of the clock or who disconnect their physical product stream from the auction by trading directly may still have the auction company handle the financial streams. To receive guaranteed payment within two weeks is an important advantage over direct trade streams, especially in combination with the additional guarantee that the auction will find a buyer for the produce. Fifth, information sharing: auction transaction records (bid prices, product quality and reliability) provide valuable market data and generate strategic marketing signals on supply and demand trends. Huges remarks: "We have a large pool of information on what customers demand and thus what should be produced by the growers. We aim to bring growers and buyers closer together and we can play an enormous facilitating role there as an auction." Increasingly often, buyers know in detail what amounts of which varieties they need and do not just select from the offering.8 The traditional production-driven channel where growers pushed their products is being replaced by the demand-driven channel where buyers pull through what they want. Coen Borren says: "The auctions can fulfill an important broker function here because they know which growers are most capable of fulfilling the specified needs."

8 A. Evans (2007) Disconnecting the product from the process only the beginning, FloraCultureInternational.com

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

History and Tradition of the Flower Auctions

The auctions of VBA and FH are not by coincidence in the Netherlands. Cultivation of flowers in the Netherlands is rooted in a long horticultural tradition, especially in the region around Aalsmeer and the Westland region further south. Due to the proximity of the North Sea, both areas have a temperate climate. Greenhouses there do not have to be adapted to extreme temperature fluctuations. Urbanization in the western part of the country created a substantial market nearby. Growers themselves established the first auctions of horticultural produce around the previous turn of the century. At first convening in greenhouses or local bars, they stimulated the entire horticultural industry. During the economic boom after World War II these auctions became the central element in a sophisticated cluster of breeders, agriculturalists, seed companies, utilities and construction companies specialized in greenhouse needs, transportation firms, and specialists offering insurance, software, and consulting.9 The flower auction in Aalsmeer was founded in 968 when two auction companies merged to form the Verenigde Bloemenveiling Aalsmeer and became the center of flower trading close to Amsterdam. This made VBA the largest flower auction company in the Netherlands (and thus in the world) until 2002. It operates one of the world's largest commercial buildings, with a surface of . million m2 (more than 250 football fields) close to Schiphol airport. Other flower auction houses emerged over the course of the 20th century in the Westland (around Rotterdam and The Hague), in the north (Eelde), and in the south (Venlo). Flora Holland is the result of a string of mergers between 973 and 2002 which joined all those companies except for two regionally oriented auctions that are still independent. The name Flora Holland came with the last merger in 2002. Jacques Teelen, the FH CEO, directed the merger process closely and succeeded repeatedly in turning the variety of auctions into a well-operated single company that finally outgrew its national rival VBA. During all those years of growth, Teelen gained a reputation for building bridges between the different parties. The final merger between FH and VBA is considered to be a merger of equal partners. The companies are very similar, with a large overlap in strategies and more or less comparable financial reserves (Exhibit 1 for the financials of both companies). Small differences can be observed, however. Due to its single location auction, VBA has a more hierarchical structure than FH, which has a layer of managers running its five auction locations. At VBA there is more emphasis on targets, deadlines, and control while at FH there is more delegation of responsibilities and budgetary authority. Due to its proximity to the airport, VBA has a stronger international orientation. In 2006, VBA opened membership to non-European growers, which attracted 200 new members from countries like India, Israel, and Kenya. VBA also has a strong tradition of attracting international wholesalers to their auction. FH instead has three times more registered buyers than VBA, and as a multi-location company in the rural areas, FH has a culturally more diverse group of growers in the membership.

9 See, for example, M. Porter, The Competitive Advantage of Nations, Basic Books, New York, 1990

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

The Merger Decision

The intention to merge the two auction companies by January 2008 was signed on 23 October 2006 by the two chairmen of the flower cooperatives that own the auctions reportedly while enjoying a cup of coffee and apple pie.0 Other options that could strengthen the system had been thought through in the company boardrooms.The auctions are aware that the existing situation with two large competitors struggling for top position in the auction market appeals to the growers in many important ways. But, the auction leadership argues that their strategic overlap and lack of standardization cause systematic inefficiencies. Huges: "The primary objective of the auction is to generate the highest possible price for the grower, who in the end is the shareholder and cooperative member. Large buyers already buy from both auctions and large growers already source to both auctions. They actually already consider the auctions as one big market place." A stronger degree of collaboration would not be an adequate solution, says Huges: "There is already a vast degree of collaboration between the auctions, but when large investments should be made, or logistic processes and infrastructure should be adapted, it has appeared that 'there's nobody home'. So if we want to clear this once and forever, we should merge and make it one organization." The German Landgard company operates two flower auctions not far from the Dutch border. It is the only other significant European flower auction company next to VBA and FH. But unlike the Dutch auctions, Landgard has integrated forward in the channel, engaging heavily in wholesaling activities. Also, Landgard deals not only with flowers and plants, but fruit and vegetables too.2 A merger with the Landgard company would not really help FH or VBA. Market overlap with the German competitor is much smaller for either of them than their own overlap (Exhibit 10 for a benchmark of the major European auction companies). Nor is forward or backward integration in the production chain really an option. That would mean that the auctions would move away from their core competences and begin to compete with their owners or their customers. Huges comments: "We thought about forward and backward integration but we decided that we should not abandon our specific role in the chain. We are good in sourcing national and international production streams, bringing them here and offering them to the market. It is better to stick with that role and provide an answer to internationalization, grow even larger, reduce costs, and add value. We considered all the options and found that merging was the best."

10 A notable detail is that neither of these chairmen comes from the regions of traditional rivalry in Westland and Aalsmeer, which is said possibly to have facilitated the process. 11 On an annual basis, a trade value of 250 million euros is sold by FH members at VBA. Hans van der Lugt, Fusie houdt bloemenprijs op peil, NRC, 26 October 2006 12 www.landgard.com

0

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Planning the Merger and Developing the Business Case

Although the signed intention to merge was an important step, as always it was only the beginning of a lot of work to come. To prepare the merger, a working group formed, with representatives from both auctions and co-chaired by the two CEOs, Teelen and Huges. A number of decisions large and small had to be taken for the merger to take shape. The name of the flower auction will be Flora Holland, the logo will be VBA's red tulip. Teelen (with his experience from prior mergers) leads the merger process, where Huges will be CEO of the newly merged auction company. The combined company will comprise three export auction locations and three regional auction locations, with headquarters in Aalsmeer and separate offices for intermediary services and sourcing/import.3 The different locations will continue to compete for the business of growers and buyers. The total number of employees will drop by 300 or 400, which can be achieved through natural attrition. Once merged, the auction companies expect to economize 0 million euros on a total cost base of roughly EUR 400 million. Turnover is expected to grow by 3% a year, which is higher than the combined average for both auctions before merging (2.5%). While operating margins would effectively double, the cost savings are expected to be passed on in form of lowered fees for growers and buyers. The most attractive cost savings will be realized by standardizing processes. Buyers can achieve a benefit of 29 million euro a year from standardization of logistics processess, bundling of transport streams and rationalization of operational processes, while growers may benefit to the tune of 3 million and transporters up to 2 million euro a year. Therefore the first measure will be an investment of 70 million euros to standardize the trolleys, followed by installation of a combined ordering and payment system. According to Huges: "This may seem a trivial problem, but we have 130,000 trolleys while FH has 150,000 trolleys circulating every day. These days they are different and thus not interchangeable, so growers have two different types of trolleys on their compounds. The lack of uniformity generates unnecessary costs to both customers and growers. This is one of the investments that needs to be done quickly." The combined company will also invest in its long-term market position. Huges continues: "We need to improve transparency, open new markets, and facilitate direct streams of produce. The plan is for the merged auction company to invest 15 million euros annually for the next four years on these areas."

13 The sourcing/import departments will appoint approximately 20 members to promote the company's various auctions among foreign growers in particular.

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

In general, investments will be of three categories. . The auction will improve transparency by investing in channel information systems like tracking and tracing systems, supply information, and price information. This should open up new markets, such as new wholesalers in Eastern Europe, and it should connect with growers in upcoming areas like East Africa. In other words, the network in which the auction plays a central role should further expand geographically. The increasingly large scale of grower operations is not only a threat to the auction, but also an opportunity. Agricultural economist Wijnands explains: "If qualities produced by large scale growers increase, it may be more attractive for them to bring flowers to the auction again. An increasing share of the flowers produced in Kenya, for example, has been returning to this auction place." 2. The expansion of the network will be facilitated by investments in remote buying systems. Electronic auctioning for flowers requires exceptionally advanced systems for information flow and quality controls, because buyers cannot directly experience the products until they receive them. According to Huges: "We follow the technological developments in the market and bring together supply and demand in more efficient ways." 3. Because electronic auctioning makes transport of produce to the Netherlands obsolete, the new auction company may open hubs at several places in Europe and Africa, where flowers and plants are brought together, and where perhaps bulk is broken, value is added, quality is checked, information collected, and from where products are sent directly to buyers. How deeply the company will be involved in those investments depends on the scope of collaboration with local transportation and processing companies. That decision will also be influenced by the business operators who break bulk and add value in the future channel. Borren explains: "Perhaps it will be cheaper to make bouquets in African countries, but that also depends on whether machines can be developed that reduce the necessary hand work."

Addressing Concerns over the Merger

Having cleared the merger path of immediate legal obstacles (NMa investigation), the next important hurdle is to convince cooperative members that this merger is in their best interest. The cooperative members have a decisive voice each member is entitled to vote, but votes are weighted for the size of their firms. Two thirds of the weighted votes in each cooperative must approve the merger plans. And a good number of stakeholders see structural changes in the flower and plants industry as well as the merger plan in a different light than the management of either auction does.

2

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Criticism comes mainly from buyers, who fear increased fees and a new potential entrant in their business sector downstream. The German association of wholesalers (BGI) goes even further: not intending to accept the merger, they may take objections to the European Commission.4 Henning Moeller, managing director of BGI is quoted as saying: "It was perfect that the trade could do business with two competitors. Now there will be a monopoly not only in Holland but all over Europe. We foresee tremendous problems in negotiations over prices, which will rise. As the major trade-related consuming nation of cut flowers the consumers' interests are at stake." During a meeting of the Dutch wholesaler organization VGB, chairman Herman de Boon announced that wholesalers believed that the cost advantages could have been achieved by collaboration between the auctions5. He spoke of agreement among the wholesalers on one thing: "We certainly don't want to be confronted with a monopolist on the production side moving forward in the supply chain." The real bone of contention hidden behind these claims may be the reinforced power position of the big auctions in the channel. Shortly after release of the auctions' intention to merge, the Dutch Flower Group announced their intention to grow more rapidly than planned. They anticipate that the auctions will be involved in export activities after the merger and will begin to compete with wholesalers. By growing larger, they intend to be able to engage in more direct trade with growers.6 Those arguments opposing the merger from the buyer side raise concerns among the VBA and FH members. So Huges and other members of the working group have promoted the merger intensively over the past year. Taking a road show to the membership, they present the plans, explain what the organization of the merged auction will look like, and listen to member demands and desires. The management faces several critical questions from many corners of the trade. In a well read newspaper,7 Emiel Wubben, expert on mergers and acquisitions at Wageningen University, criticized: "On the one hand, the advantages are intuitively clear, on the other hand the merger proposal doesn't provide any number with respect to the expected cost advantages, even though that is a main objective of the merger."

14 A. Evans (2007) Wholesalers working to win direct import, FloraCultureInternational.com 15 Groothandel ziet geen voordelen in fusie bloemenveilingen, VGB, 4 Dec 2006 (www.agriholland.nl) 16 Dutch Flower Group wil versneld groeien na fusie bloemenveilingen, Financieele Dagblad, 28 Dec 2006 (www.agriholland.nl) 17 Emiel Wubben, Iemand moet FloraHolland scherp houden, Financieele Dagblad, 3 Nov 2006, p.11. In personal communication to the authors, Wubben later clarified that the auctions had presented the numerical information on cost advantages to the NMa.

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

As interests of the 3000 members are diverse, the benefits and risks of the merger will vary among them. Coen Borren outlines the main segments: "We use many ways to segment the growers, but the most straightforward is on the basis of what they grow. Growers that focus on pot plants rely more on intermediary services, while growers that focus on flowers use the clock system more. In addition, the plant growers make more use of multiple auction locations." This segmenting correlates somewhat with a segmentation by size: larger growers use more of the direct intermediary services and tend to use multiple auction sites. For most of the small growers producing "average" qualities, the bottom line will be the value of their company which they hope will provide their retirement income once they sell out to a consolidator. They are likely to vote for the option that is best for the international position of the Netherlands in the flowers and plants trade, and thus favor the merger. A pot plant grower8 formulated it this way: "What I find most important is that the management of the somewhat bureaucratic, slow apparatus, which the auction is now, turns into an efficient and fast organization. A company with ambition" The small growers producing specialties will probably favor the merger as well. To them it will be beneficial because they do not handle product marketing themselves, and will enjoy a wider market after the merger. Experience with previous FH mergers has shown that these growers begin to sell at multiple auctions if they expect to get better prices that way. For large growers, the decision to vote in favor or against the merger is mostly a strategic channel decision. They have the full range of options varying from doing all of their business and handling of all functions (logistics, sales, and finance) through the auctions, to conducting everything direct. An important objective of the road show is therefore to convince large growers that trading through the auction is to their advantage. Unlike smaller growers, the larger ones may engage in power play. The strategy that some were following thus far was to play the auctions against one another, threatening to begin direct trade with the wholesale companies, when bartering for cheaper tariffs. They might organize themselves in clusters to further strengthen their bargaining power. Finally, regional concerns may play a role as well. To FH, the timing of the merger solves a potential successor problem, as it might have been difficult to replace Teelen as CEO. Teelen has always been able to gain the trust of regions farther from Westland for FH. His successors in the much larger merged company will also have to establish working relationships with the northern and southern parts of the country and with the growers that depend on them.

18 Fusietips voor megaveiling, Bladeren (VBA periodical) March 2007, p. 2

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Delivering on a Promise to the Growers

The membership vote to approve the merger is scheduled for September 9, and until then Timo Huges, Jacques Teelen and their management colleagues will have many more meetings listening to the concerns of growers and buyers alike, explaining the benefits and reasoning of this merger. Huges summarizes the arguments succinctly: "One may claim that this merger is an attempt to restore a position of power. That is true and we need this power to serve the Dutch growers in a globalizing world, because this truth concerns the auctions as a driving force behind transparency, innovation, and the central role that Holland plays in the international trade streams in flowers and plants." He remembers the words that his FH counterpart, Jacques Teelen, spoke to the press shortly after the announcement of the intention to merge: "This is a very large step we make and the race isn't over yet." As soon as two thirds of the member voting rights in each cooperative have agreed on the future of the auctions, the race will begin in earnest. Says Huges: "The real challenge will be to deliver the merger's promise to our growers, their customers, and all other players in the network to make sure that the growers' price is maximized at lowest possible costs and that the central role of the Dutch auction system is sustained in the flower and plants system of tomorrow."

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 1

Financials of the world's two largest flower auctions (2004-2006)

Flower Auction Aalsmeer (VBA) Consolidated
2006 2005 2004

Balance Sheet
(in thousand euros) Assets Material fixed assets Financial fixed assets Current assets Cash at bank and in hand Total Assets Equity and Liabilities Equity capital Subordinated borrowed capital Provisions Long-term liabilities Short-term liabilities Total Equity and Liabilities

Flora Holland (FH)

2006 2005 2004

383,724 ,767 83,854 426 479,771

37,08 6,026 87,008 96 474,366

374,50 5,339 94,842 62 483,493

432,046 34,624 70,373 3,400 552,591

434,08 32,587 49,2 ,94 530,206

44,59 32,078 46,20 2,924 534,812

62,58 09,36 43,257 5,35 50,005 479,771

58,989 99,443 37,69 5,200 63,043 474,366

78,472 04,704 0,25 36,60 53,50 483,493

09,026 30,459 96,22 26,984 552,591

03,225 28,20 83,432 25,339 530,206

6,797 3,937 209,508 204,570 534,812

Income Statement
(in thousand euros) Operating Income Operating Costs Operating Result Financial Income and Expenditure Result before Tax Result after Tax

Flower Auction Aalsmeer (VBA)

2006 82,027 67,33 4,894 8,505 6,389 5,625 2005 8,354 6,990 9,364 0,36 9,048 5,888 2004 85,256 7,642 3,64 0,89 2,795 2,647

Flora Holland (FH)

2006 22,306 9,748 20,558 3,032 7,526 6,237 2005 22,975 90,449 22,526 5,382 7,44 5,432 2004 23,560 95,09 8,469 3,588 4,88 5,046

Sources: 2005 and 2006 Annual Reports (VBA and FH)

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 2

Cut flower industry in selected countries: market sizes, production and trade flows

Cut flower sales 2002

100 per capita 100 million 80 60 40 20 UK Belgium Germany France Austria Netherlands Switzerland Sweden Austria
0.07

Sales per person

Market Value

Cut flower production and imports 2002

8 6 1 billion 4 2 0
USA Japan Germany UK Italy France

Spain

Switzerland

Domestic production

Netherlands

Import from the Netherlands

Other imports

Cut flower exports 2002

2.5 1 billion 2.0 1.5 1.0 0.5 Germany Netherlands Canada USA Italy 0
0.02 0.03 0.09 0.02 0.60 0.30 0.20 0.15 0.09 0.09 0.05 0.03 0.02 2.30

Ecuador

Kenya

Belgium

Russia Zambia Austria

USA

Japan

Italy

Spain

Zimbabwe

Colombia

Israel

Spain

Thailand

Sources: International Association of Horticultural Producers (AIPH), International statistics flowers and plants, Institute for Horticultural Economics, University of Hannover (2004) Vol. 52; Graphs: J. Wijnands (2005) Sustainable international networks in the flower industry, International Society for Horticultural Science, Leuven, Belgium

South Africa

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8
Netherlands USA Japan Kenya Israel Uganda Zambia Tanzania Colombia Ecuador

Exhibit 3

Area for ornamentals (hectares) 5,800 7,750 3,540 % 3,000 440 high roses chrysanthemums lilies 23% Germany UK France Kenya Israel Zimbabwe Colombia Ecuador Mexico Netherlands Thailand South Korea 33% 68% 9% > 80% gladioli roses chrysanthemums chrysanthemums carnations roses roses wax flowers roses hyphericum roses lysianthus gypsophilia roses high high low high low low low roses 60 70 low roses carnations low roses 33 n/a 200 45 28 6 7 70 0 8% 5% 5% 4% 0 5 5,248 3,50 45 230 8 >7 540 90 5 260 0,000 80,000 40 ,900 8 40 2 450 375 5,560 9,000 2,750 n/a n/a 5,900

8,300

23,300

20,000

5,900

3,55

Protected area for flowers (hectares)

Number of farms

European Food and Agribusiness Seminar

Production value (EUR million)

Growth rate of production

Export value (EUR million)

Import value (EUR million)

Cost price at farm level

Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Main varieties of cut flowers (in order of importance)

Overview of cut flower production countries

Share of main variety (%)

95%

80

29

80 USA Netherlands Russia

Main export destinations (in order of importance)

Netherlands Netherlands Netherlands Netherlands Netherlands USA UK USA Germany UK Germany Germany Canada

Source: J. Wijnands (2005) Sustainable international networks in the flower industry, International Society for Horticultural Science, Leuven, Belgium

Main countries of import origin (in order of importance)

Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 4

Cost of growing roses in Kenya and in the Netherlands (2003)

Kenya 29 34 Netherlands 67 63 22% 8% 30% 26% 5%

Costs (euros per sq. m) Yields (euros per sq. m) Cost breakdown Energy costs Air freight charges, auction preparation Labor costs Fixed assets and interest Equipment and seeds

44% % 3% 32%

Estimates based on an exchange rate of .35 USD =  EUR

Source: VBA compilation derived from F. Oberholzer-Gee, V. Dessain, D. Beyersdorfer, and A. Sjman (2005), Bloemenveiling Aalsmeer, Harvard Business School, Case N9-706-441

Exhibit 5

Crop value and planted area of the world's main flower growing countries

Total horticulture production areas (selection from available data for 2002)
30 25 30 20 25 15 20 10 15 5 10 0 5 0
122 64 122 64

1000 1000 hectares hectares

USA USA Mexico Mexico Taiwan Taiwan Brazil Brazil Japan Japan Italy Italy Netherlands Netherlands Thailand Thailand UK UK Spain Spain Germany Germany France France Colombia Colombia Korea Korea (Rep.) (Rep.) Australia Australia Costa Costa Rica Rica Ecuador Ecuador Israel Israel Kenya Kenya Austria Austria TurkeyTurkey Belgium Belgium USA USA Mexico Mexico Taiwan Taiwan Brazil Brazil Japan Japan Italy Italy Netherlands Netherlands Thailand Thailand UK UK Spain Spain Germany Germany France France Colombia Colombia Korea Korea (Rep.) (Rep.) Australia Australia Costa Costa Rica Rica Ecuador Ecuador Israel Israel Kenya Kenya Austria Austria TurkeyTurkey Belgium Belgium

Total production values (selection of countries 2002) 6

5 6 4 5 3 4 2 3 1 2 0 1 0

1 billions 1 billions

Sources: International Association of Horticultural Producers (AIPH), International statistics flowers and plants, Institute for Horticultural Economics, University of Hannover (2004) Volume 52; Graphs: J. Wijnands (2005) Sustainable international networks in the flower industry, International Society for Horticultural Science, Leuven, Belgium

India India China China

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 6

Self-description by Dubai Flower Center

Dubai Flower Centre is the industry leading transshipment centre for cool chain processes that safeguards quality, maximizes shelf life and enhances profitability. The key-elements in the concept are: Closed-loop cool chain supply system

Refrigerated "cool dollies" transfer pallets between Dubai Flower Centre and aircraft, automated handling equipment moves perishable cargo through X-ray to specially designed Electronic Transfer Vehicles, and on through sealed temperature controlled air locks to the storage area. The climate-controlled zones provide optimal product temperatures to maximise shelf life and are monitored 24 hours a day. Free-zone environment

In line with Dubai's policy of offering a "free and fair" business environment, The Free Zone is organized to meet the requirements of companies establishing themselves at the airport. Dubai Flower Centre's Free Zone facilities provide attractive business incentives including 00% foreign ownership, a corporate tax holiday for 5 years renewable for an additional 5 years, no personal income tax, freedom to repatriate both capital and profits and no currency restrictions. Supply chain intelligence

A tightly controlled environment from plane to consignment prevents another break in the supply chain, minimizing the industry standards which assume 20% of the value of perishables to be lost across the entire supply chain. Dubai Flower Centre's state of the art computerized tracking system allows exporters and importers the ability to track the flight status, product loadings and temperature of their products through the supply chain process Geographical location with connections to 65 destinations

At the geographical crossroads between Europe, Asia and Africa, the Dubai Flower Centre serves an international market of over 2 billion potential consumers and a local GCC market with a GDP of nearly $540 billion. Over 2 airlines already connect through Dubai International Airport to more than 65 destinations and further expansion is creating even more opportunities to unite global markets. Dubai Flower Centre is the one-stop shop for local and international buyers, traders, producers and exporters. The key players in the perishables marketplace can all be found in the main building, each providing a wide variety of value-added services and products.

Source: Dubaiflowercentre.com

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 7

Consolidation trend of buyers and growers at the VBA and FH auctions

Industry structure of VBA buyers in % of companies per size category (? million)

% of VBA buyers 30 25 20 15 10 5 0 more than 20 2000 1020 2005 510 15 0.51.0 0.10.5 less than 0.1 million

Industry structure of VBA growers by numbers of companies per size category (? million)
500

number of VBA growers

400 300 200 100 0 more than 2.5 2000 2005 1.02.5 0.51.0 0.10.5 less than 0.1 million

Industry structure of FH growers by numbers of companies per size category (? million)

600
number of FH growers

500 400 300 200 100 0 more than 2.5 2002 2005 1.02.5 0.51.0 0.10.5 less than 0.1 million

Source: Company documents (VBA and FH)

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 8

Quick summary of the merger proposition Dutch original text

To English readers: All arguments of this quick summary are explained in the main body of the text. The Dutch original can relay nuances to native Dutch speakers, which a translation cannot. Generiek doel fusie: . Bloemenveiling Aalsmeer en FloraHolland willen fuseren om de (inter)nationale marktpositie (van hun leden en klanten) en de marktwerking in de mondiale sierteeltsector te versterken. Zo kunnen we de internationale concurrentie beter aan. Aanleidingen: 2. De wereldmarkt verandert in hoog tempo. Productie en handel in bloemen en planten internationaliseren, specialiseren en nemen in schaalgrootte toe. Om goed op de schaalvergroting en internationalisatie bij aanvoerders (telers) en kopers (exporteurs en groothandelaren) in te spelen moeten de veilingen hun krachten bundelen. Wat levert het op? 3. Door de fusie kan een betere binding van internationale stromen (concentratie van vraag en aanbod) aan de Nederlandse marktplaatsen worden gerealiseerd. 4. Door de fusie is straks het best mogelijke pakket in- en verkoopdiensten n het breedste en diepste bloemen- en plantenassortiment beschikbaar. 5. Dat gebeurt via een sterk netwerk van marktplaatsen, tegen de laagst mogelijke ketenkosten. 6. Versterking marktwerking: de markt werkt het beste bij concentratie van vraag en aanbod en transparantie. 7. Door de schaalvergroting na de fusie zijn we een betere partner voor grootschalige kwekers en kopers en bouwen we aan een grotere toegevoegde waarde als logistieke dienstverlener (samenvoegen orders/productstromen/transporten etc.). 8. Tegelijk creren we als fusiecombinatie ook betere kansen voor kleinere aanvoerders (met nicheassortiment toegang tot wereldmarkt) en kleinere klanten (wereldaanbod blijft beschikbaar). 9. Naast schaalvergroting door samenwerking realiseert de nieuwe fusiecombinatie verbetering van de service en verlaging van de kosten. Er wordt verder gestandaardiseerd. 0. De integratie van diensten en systemen, onderling en met aanvoerders en klanten, wordt eenvoudiger. . De veilingen worden transparanter en efficinter, waardoor de efficiency bij kwekers en klanten groter wordt. 2. Onze kerntaak is: het nationaal en internationaal sourcen, vermarkten en distribueren van sierteeltproducten aan bij ons inkopende handel. We worden gn eigenaar van het product. 3. We kunnen samen makkelijker nieuwe diensten ontwikkelen (groter innovatiebudget). Uit kracht of uit noodzaak? 4. De fusie van twee gelijkwaardige partners is er een uit sterkte, en zorgt ervoor dat de mondiale slagkracht groter wordt. Regeren is vooruitzien. Generiek bij-effect: 5. De bijdrage van de sierteeltsector aan de "BV Nederland" kan zich hierdoor verder ontwikkelen.
Source: Company documents (VBA)

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 9

Transactions at VBA by product category and transaction type (9752005)

Value of transactions by product category

2000 2000 2000 1600 1600 millions millions millions 1600 1200 1200 1200 800 800 800 400 400 400 0 0 0 1975 1980 1990 1975 1980 1990 Cut flowers Plants 1975 Cut flowers 1980 Plants1990 2001 2001 Garden plants 2001 Garden plants 2002 2002 2002 2003 2003 2003 2004 2004 2004

Cut flowers Plants Value of transactions by transaction Garden plants type 2000 2000 2000 1600 1600 millions millions millions 1600 1200 1200 1200 800 800 800 400 400 400 0 0 0 1975 1980 1990 2001 1975 1980 1990 2001 Auction clock MVA (Intermediary service) Auction clock1980 MVA (Intermediary service) 1975 1990 2001 Auction clock MVA (Intermediary service) 2002 2002 2002 2003 2003 2003 2004 2004 2004

Structure of transactions by product category and transaction type

100 100 100 80 80 % % 80 60 60

60 40 % 40 40 20 20 CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP 1975 1980 1990 2001 2002 2003 2004 0 1975 1980 1990 2001 2002 2003 2004 CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP 1975 1980 1990 2002 2003 2004 Auction Clock MVA (Intermediary services) 2001 Auction Clock MVA (Intermediary services) CF - cut flowers P - plants GP - garden plants CF Auction Clock P - plants GP - garden plants - cut flowers MVA (Intermediary services) CF - cut flowers P - plants GP - garden plants 6 6 5 5 6 4 4 5 3 3 4 2 2 3 1 1 2 0 0 1 20 0 0

billion stems/pots billion stems/pots billion stems/pots

European Food and Agribusiness Seminar 1975 1980 1990 2001 2002 2003 2004

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40 60 % Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization 20 40 20 0 0 CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP 1975 1980 1990 2001 2002 2003 2004

CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP CF P GP Auction 1975 Clock MVA (Intermediary services) 1980 1990 2001 2002 2003 2004 CF - cut flowers P - plants GP - garden plants Exhibit 9 Clock Auction MVA (Intermediary services) CF - cut flowers P - plants GP - garden plants

Transactions at VBA (9752005) - continued

Volume6of transactions by product category

billion stems/pots billion stems/pots 6 5 4 3 2 1 0 5 4 3 2 1 0 1975 1980 1990 2001 Garden plants 2001 Garden plants 2002 2002 2003 2003 2004 2004

Cut flowers Plants 1975 1980 1990 Cut flowers Plants

Volume of transactions by transaction type

6 billion stems/pots billion stems/pots 6 5 4 3 2 1 0 5 4 3 2 1 0 1975 1980 1990 2001 2002 2002 2003 2003 2004 2004

Auction Clock MVA (Intermediary services) 1975 1980 1990 2001

Auction derived Sources: VBA compilations Clock from MVA (Intermediary services) D. Beyersdorfer, and A. Sjman (2005), Bloemenveiling Aalsmeer, F. Oberholzer-Gee, V. Dessain, Harvard Business School, Case N9-706-441

Exhibit 10

Benchmark of European flower auctions (ranked in terms of turnover)

Turnover ( millions) 200 Employees 2800 Suppliers 6600 5400 3000 600 400450 75 600 20 Buyers 3500 050 25,000 40,000 350 450500 220 350 300 Building Clocks surface (m) ,500,000 26 (5 locations) ,000,000 3 6 20,000 96,000 20,0000 3 5 2 3 2

Auction Flora Holland (Netherlands) VBA (Netherlands) Landgard (Germany) SICA March aux Fleurs d'Hyres (France) Euroveiling Flower Trade Centre (Belgium) Auction Vleuten (Netherlands) Flower auction Oost (Netherlands) FloraBella (Italy)

690 800 50 (of which 848 300 in flowers and plants) 45 60 33.6 26.0 85 56.9 50 4.3

Source: FH: H. van der Salm, Flora Holland Market Facilitator, presentation Wageningen University, 6 June 2007; Landgard: www.landgard.de and personal communication; Oost: www.von.nl and personal communication; Vleuten: www.bvv.nl and personal communication; others: A. Evans, Flower auctions around the world, FloraCultureInternational.com, May 2007

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 11

Flower auctioneering in the Netherlands

VBA buildings in Aalsmeer

Flowers in greenhouse

Harvest

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Flora Holland Flower Auctions A Dutch Merger in the Face of Globalization

Exhibit 11

Flower auctioneering in the Netherlands - continued

Flowers arrive in Aalsmeer by truck

Flowers in line to be auctioned

Buyers place their bids on the flowers that pass beneath three different auction screens

Remote buying system screen with auction clock and information

Trolleys bring the flowers to the wholesalers' trucks or connected compounds

Flowers are further processed by wholesalers

Source: VBA

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European Food and Agribusiness Seminar