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Fonterra capital structure plans to be unveiled next week

Consultation on Fonterra's third vital capital structure stage will begin on April 7.In a statement this afternoon, the company stated its board and shareholders' council have agreed on the concept for trading shares among farmers and that it should go ou

Liam Baldwin
Tue, 30 Mar 2010

Consultation on Fonterra's third vital capital structure stage will begin on April 7.

In a statement this afternoon, the company stated its board and shareholders’ council have agreed on the concept for trading shares among farmers and that it should go out for consultation.

Trading among farmers involves shareholders buying and selling Fonterra shares from one another instead of buying or redeeming them through the co-operative.

Fonterra chairman Sir Henry van der Heyden said the concept was signalled as a possibility last year as another important step that would strengthen the company’s ability to provide the best returns for its shareholders.

“It would get rid of redemption risk once and for all, protecting the co-operative and ensuring it was better placed to grow farmer shareholders’ investment in Fonterra,” he said.

“It would stop money washing in and our of Fonterra and provide the co-operative with a stable base of permanent share capital, which would give certainty about the level of capital, regardless of any changes in milk production in any season.”

Fonterra shareholders voted last year on the first two stages of changes to the co-operative’s capital structure.

Step one, strengthening the share structure, gave farmers the opportunity to increase their shareholding from one share for every kilogram of milksolids produced (100%) to 120% of production.

The second step created a restricted share value, which changed the way Fonterra shares were valued to recognise the market was restricted to only Fonterra suppliers.

Trading among farmers would eliminated the redemption risk to Fonterra, especially during periods of drought where farmers redeem there shares because of failing production.

Invitations were mailed to Fonterra’s 10,500 shareholders today to advise of a special television broadcast (SKY digital 950) at 1pm on Wednesday, April 7.

This will be followed by a series of farmer meetings to discuss the suggested approached between April 12-16.

For this third step to be approved, 75% of milksolids represented by those who actually vote, need to agree.

Liam Baldwin
Tue, 30 Mar 2010
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Fonterra capital structure plans to be unveiled next week
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