Fonterra chairman, Sir Henry van der Heyden, said the announcement addressed considerable speculation about the cooperative’s capital structure review and would allow shareholders to debate the issues without needless distraction: “Many of our shareholders have made it clear they want to retain 100% farmer control and ownership of their cooperative.”
Under Fonterra’s constitution, 75% of votes must support any change to capital structure.
“Taking a public listing off the table is a pragmatic, common-sense approach which reflects how our shareholders feel,” said van der Hayden. “It would be a waste of time and money to debate the merits of a public share listing when there’s no prospect of securing a 75% vote. This is the most important conversation we’ve had in our cooperative since we formed Fonterra in 2001. We want to have it without the distraction of misplaced speculation that clouds our discussions.”
The board, with the unanimous support of the Fonterra Shareholders’ Council, will discuss with farmers possible solutions around a three-step process that, if accepted by farmers, would take care of Fonterra’s capital structure issues for the immediate future. This is all designed to address redemption risk and to secure capital for the cooperative.
Fonterra’s shares relate to milk production and are redeemable. This means at times of falling production, significant amounts of equity are lost from the balance sheet, affecting debt-to-equity ratios.
The consultation process with shareholders will begin on 18 September.
Sir Henry said that, if farmers supported the first three steps, there were a number of options not involving public listing that they could consider for any fourth step.
Source: Fonterra
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