Fonterra confirms timeline for implementation of new capital structure

Dairy cooperative Fonterra has confirmed that its new flexible shareholding capital structure is set to be implemented in late March 2023.

The structure is intended to make it easier for new farmers to join the cooperative and for existing farmers to remain, by granting greater flexibility in the level of investment required.

The implementation timeline is subject to the board being satisfied that “the relevant preparations are completed before then”.

Fonterra chairman, Peter McBride, said: “Our cooperative is already making good progress towards our 2030 strategic goals and we believe moving to our flexible shareholding structure will help ensure that we stay on track”.

According to McBride, the new structure will support Fonterra’s strategy by protecting farmer ownership and control, helping to maintain a sustainable milk supply and supporting a stable balance sheet.

In December 2021, the cooperative’s farmers voted on the proposal to move to flexible shareholding, with over 85% of the votes cast being in support of the move. Since then, the cooperative has been working with the government of New Zealand to get related changes made to the Dairy Industry Restructuring Act – the legislation that enabled the formation of Fonterra in 2001.

Speaking of the passing of the relevant legislation in parliament, McBride commented: “This milestone gives us the confidence to put in place the transition to our flexible shareholding structure. We would like to take this opportunity to thank Minister O’Connor and the government for passing the legislation through under urgency and giving the coop’s shareholders this much-needed certainty.”

The implementation timeline was based on a number of considerations. The March date avoids Fonterra’s share trading black-out period associated with the coop’s interim results. It also provides shareholders with time to understand the information from Fonterra regarding the structure and seek financial advice.

To help support liquidity, Fonterra is aiming for new market making arrangements to become effective before the structure is implemented. The coop intends to confirm the final implementation date at the same time as its interim results are announced, currently scheduled for 16 March 2023.