What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
Judging by an email sent out to 10,500 shareholders last week, the board is unlikely to support the resolution, moved by former directors Colin Armer and Greg Gent.
Fonterra chairman John Wilson last week told shareholders in an email that the co-op plans to start the governance and representation consultation with farmers in the last week of January and hold the final vote at a special meeting in May.
Wilson told Dairy News he had nothing to add to his email to farmers. "The board will give its views when voting papers are sent out to farmers," he said.
Voting for Fonterra's three board seats begins October 30; voting papers with notice of the annual meeting will be sent to farmers later this week.
Armer and Gent will table a resolution at the meeting to reduce the number of elected directors from nine to six and the number of appointed directors from four to three to give a total of nine directors.
They believe a smaller board is essential to improve the governance and performance of the cooperative. The proposal requires 50% support by the shareholders council and at least 75% of shareholder votes in favour.
Gent, a former deputy chairman of Fonterra, and Armer recently held a teleconference with members of the shareholders council.
Armer told Dairy News that he and Gent appreciated the council hearing their views. "But we haven't heard from the board," Armer said.
He says Fonterra's constitution belongs to its shareholders and they are entitled to tweak it.
Armer expects the resolution to be tabled at the annual meeting in Waitoa on November 25.
"We will let the shareholders decide on the resolution," he says.
Armer and Gent were also critical of the board's communication with farmers on the issue. They say farmers have not been told a governance review is underway with a view to a special shareholders meeting mid-way through next year.
"This will be a surprise to them," says Gent. "The governance review was promised at the annual meeting in 2012 in reaction to another proposal dealing with governance put forward by another shareholder.
"That review sank without trace, so farmers will no doubt be sceptical about another promised governance review. It was a high priority then and three years is more than long enough for them to get recommendations out to shareholders."
In his email to farmers, Wilson denied the board was at loggerheads with Armer and Gent.
"We have all been in agreement that we need to look at our governance and representation. After 14 years, it is time to look at what would be best for the co-op in today's world, and that process is well underway.
"But your board considers that a shareholders' discussion needs to be part of that process; discussion is an important part of our co-op. We learned that in 2007.
"At that time the board presented you with just one option on capital structure – the first proposal. We put this out there in isolation and then had to pull it.
"It unsettled the shareholder base and was not the right process to handle such an important decision and your board subsequently acknowledged that. We must not repeat that mistake."
Wilson says there was a need to respect each other's points of view.
Fonterra's plan
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- Start the governance and representation consultation with farmers in the last week of January
- Hold the final vote at a special meeting in May.
- In the meantime board and council will work with global cooperative governance experts to give farmers an independent opinion on the work done by the board and council.
