Under the new plan, farmers will be offered around another 20% above their current holdings. Farmers will vote on detailed proposals in November. Theoretically, Fonterra could raise up to NZ$900m, but chairman Henry van der Heyden said it only expected around half that.
“The options we are discussing with farmers would strengthen the capital structure and make Fonterra more adaptable and competitive,” said van der Heyden. “They seek to encourage farmers to maintain or increase their equity in the cooperative.”
If these are approved, a plan for farmers to trade shares among themselves rather than selling them back to Fonterra could be voted on next year in a bid to make the cooperative’s balance sheet more stable.
Farmers’ shareholdings are currently based on their milk production, and fluctuating production requires Fonterra to issue and redeem shares. In the year to June 2008, it was forced to pay out NZ$742m in redemptions because of a drought.
“Fonterra can’t afford to have hundreds of millions of dollars washing in and out of the balance sheet every time milk production fluctuates, for whatever reason,” van der Hayden said.
Fonterra is responsible for about a third of international dairy trading and has NZ$18bn of assets.
Source: Fonterra
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