Fonterra launches Step Three
Fonterra has unveiled details of its proposed Step three in capital
restructuring which would allow farmers to trade shares among
themselves at any time.
They will also be able to share up to 200 percent of their milk supply if the proposed changes are approved. Fonterra will
target
an overall cap on dry shares at 20 percent of the total number of
shares on
issue, with provision to extend the cap by five percent in extreme
circumstances. Farmers will be able to share
up over three years to cover additional production, and have the same period to take money out if they wish.
Fonterra
believes the moves will mean more flexibility for farmers to buy
and sell shares to match their cashflows, while providing the co-op
with permanent share capital to grow shareholder returns. It would also aid in fighting off local or overseas competitors.
Under the proposal which farmers are now being consulted about, they will be able
to buy and
sell shares among themselves on the Fonterra Shareholders Market at a market price on
any
business day, by going to the Fencepost website or calling an 0800 telephone
number.
They also have the option of leaving it to their co-operative to buy and sell
shares
on their behalf at the end of the season.
To make sure there are a sufficient volume of shares to buy and sell, one or
two
substantial financial institutions would be appointed to provide plenty
of
volume in the market and less fluctuation in price.
These registered
volume providers would have their charges set by Fonterra.
A registered exchange would be contracted to
provide the administrative platform behind the market.
A Fonterra Shareholders Fund would help
farmers purchase new shares or retain shares by paying them for the
right to receive dividends and the gain/loss from any change in value of
those
shares. But farmers would still be paid their full
share-backed milk price, own the shares and retain all
their voting
rights.
They could buy back their entitlement to
dividends and any change in the share price when they wanted to, at the
prevailing market price. The fund will raise money to pay
farmers by selling investment units to friendly investors such as
sharemilkers or retired farmers with institutions and the public also
be
able to participate. Unit-holders and the fund would have no voting
rights.
Fonterra chairman Sir Henry van der Heyden said all
three
steps were developed to ensure Fonterra remained 100 percent controlled and
owned by
farmer shareholders and focused on paying
the
maximum sustainable milk price.
The Fonterra Shareholders’ Council (FSC) supports
the
concept of trading among farmers and has approved taking the approach
out to farmers. After fine-tuning depending on their response, it's
intended that a final proposal will be put to farmers with the special
meeting held in late June or early July. Any
proposal would require 75 percent support of farmer shareholders voting.
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