Fonterra revises its capital structure proposal

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Fonterra is reshaping its revised capital structure proposal following an initial round of consultation with its shareholders.

Photo: RNZ / Rebekah Parsons-King

The dairy co-operative was drawing up a revised proposal that aimed to reflect farmers’ views, including an adjustment to the proposed minimum shareholding requirement for farmers.

It would also enable sharemilkers and contract milkers to own shares.

Fonterra said consultation had been extensive since it began the process on 6 May, with a consultation booklet sent to every farmer owner.

“It’s a good time for the board to step back and reflect on the feedback as most farmers will now be busy with calving,” chair Peter McBride said.

“Once they’ve come through this particularly busy time of the season, we’ll be ready to consult on the updated proposal.”

Fonterra was restructuring its capital structure to ensure company stayed in farmers’ hands, while making it easier to join the co-operative and scrapping the shareholders fund – which allowed non-farmers to have an exposure to the company.

The company had also placed a temporary cap on the shareholders fund, which had contributed to about $2.2 billion wiped of its market capitalisation.

Fonterra said there had been 90 meetings with farmers since the consultation opened, with 5000 farmers taking part in discussions.

“The board maintains its belief that, in a flat or potentially declining milk environment, making changes early will put us in the best position to provide farmers with more flexibility while protecting farmer ownership and strengthening our co-op’s financial sustainability,” McBride said.

“We have also reconsidered voting rights in light of some feedback and at this stage our preference is for voting to continue to follow share-backed supply as it currently does,” he said.

Fonterra said it would be following up with focus groups to test different aspects of the potential changes.

“This will help us as we continue to develop a more detailed proposal to present to farmers around the time of our annual results in late September for further consultation,” McBride said.

“At this stage, we are still aiming for a farmer vote at our annual meeting, which will be held in December.”

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