The long-proposed operational merger between the South Island’s two biggest ports is one small step closer, with Lyttelton Port getting the go ahead from its major shareholder.

The Lyttelton port is looking to merge with Port of Otago and the listed port company (NZX:LPC) today confirmed that Christchurch City Holdings – its major shareholder and investment arm of the city council – was “in principle supportive” of the proposed merger.

The Ports of Otago and Lyttelton will not talk about the details of the first major report in a possible merger, but it must have been good.

In a joint statement today, the Ports confirmed that after considering the report prepared as part of the first stage of the proposal, they were moving onto the next stage with the “utmost urgency”.

The next stage involves “detailed negotiations” related to the content of the report prepared by independent advisor Antipodes Capital, which will not be made public due to its commercial sensitivity.

Lyttleton Port of Christchurch has conceded that talks over its proposed merger with Port Otago are taking longer than expected, but it told shareholders at its annual meeting today that “good progress” was being made.

In speech notes released to the NZX following the port’s annual meeting today, chairman Rodger Fisher noted the need for the amalgamation of port services was as important as ever and had been demonstrated by the recent economic conditions.

Front line stevedoring jobs at Port Otago are on the line, with the company revealing that up to 35 jobs could go following a downturn in ship numbers and container volumes.

The port revealed yesterday that following a “marked deterioration” in trading volumes, it was restructuring its workforce, with the loss of up to 35 positions of the approximately 320 staff at the port.

It said the majority of the positions would be front line stevedoring roles, as well as a number of supervisory and management positions.

Christchurch City council’s investment arm is making a bid to buy an extra 2.48% stake in Lyttelton Port Company, taking its holding above 78% of the firm.

The $2.75 bid is 50c or 22% above Wednesday’s close price and 5.8% above the $2.60 past-year high.

Lyttelton shares were up 5 cents to $2.30 this morning.

Christchurch City Holdings’ chief executive Bob Lineham said the offer provided an opportunity for shareholders to sell at a premium before any moves were made to try to delist the port company.

The breakthrough of cooperation between listed Lyttelton Port Company and Port Otago has been driven by the new chairman at Lyttelton and the effectiveness of Otago’s 15% blocking stake.

While the move is certain to be greeted with approval of the Lyttelton Port Company public shareholders, it may not be good news for port users who will regard the joint venture move as creating a bigger monopoly, tying up the two major southern outlets.

Any final decision will require Commerce Commission approval.