Fonterra mulls options - sale or IPO
An outright sale of Fonterra’s global consumer business is more likely than a float, says Forsyth Barr senior analyst equities, Matt Montgomerie.
The new capital structure proposal details will be revealed and mailed to farmers next week, a day before voting starts on November 19.
A special meeting to vote on the proposal will be held following Fonterra’s annual general meeting on December 9.
The proposal requires 75% support among voting shareholders to pass.
The proposal has already passed one hurdle- the requirement of a 50% yes vote by the Fonterra Co-operative Council.
Fonterra chairman Peter McBride says the council has already voted 92% in support of the recommended changes.
McBride says the board and management are united in the belief that the Flexible Shareholding structure is the best course of action for the Co-operative.
The decision to go ahead as planned has been informed by “a significant volume” of shareholder feedback that shows strong support for the changes, he adds.
“The board is unanimously recommending the changes to our capital structure to put us in the best position to deliver the value outlined in the strategy and protect farmer ownership and control of our co-op.
“Our strategy is focused on New Zealand milk and our future success relies on our ability to maintain a sustainable milk supply in an increasingly competitive environment, and one that is changing rapidly due to factors such as environmental pressures, new regulations and alternative land uses.”
The co-operative has made several changes to the capital structure proposal put forward in September, in response to feedback from shareholders and further consultation with the Co-operative Council and the independent directors of the Fonterra Shareholders’ Fund.
These are:
· The introduction of thresholds to support the alignment of share ownership and milk supply, and reflect Fonterra’s intention that the total number of shares on issue in the co-op is within +/- 15% of total milk supply, and that the proportion of shares held by ceased suppliers is less than 25% of the shares in the co-op.
· The way dry shares are allocated to associated shareholders (sharemilkers, contract milkers and farm lessors) has been simplified to make it easier for them to apply to hold dry shares.
· The overall limit on the size of the Fund has been reduced from 20% to 10% of total shares on issue, rather than having a total ban on any further shares being exchanged into units. This recognises that the Fund size, which is currently around 6.7% of total shares on issue, could change from time to time subject to the overall limit. Shares will still not be able to be exchanged into units on a day-to-day basis, and the Board retains its current rights to regulate this process.
