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.
On a Sky TV channel 950 broadcast today (December 16), Fonterra chairman Sir Henry van der Heyden, chief executive Theo Spierings, chairman of the board’s capital structure committee John Wilson, and Shareholders’ Council chairman Simon Couper discussed progress on TAF.
Van der Heyden said TAF remained on track for introduction in November 2012, but acknowledged there were concerns among some about the proposed custodian element of the structure.
At Fonterra’s annual meeting CEO Theo Spierings also acknowledged these concerns and undertook to come back to farmers with some possible alternatives prior to Christmas.
“Next year we will outline three options: the current custodian proposal; a second option that offers some important changes to the current proposal; and a third option which gives legal title to farmers,” says Spierings.
It is retention of legal title which has been concerning a growing ground swell of shareholders who say if that title is transferred to the custodian, company and trust law will force the custodian to work in the interests of outside investors, which, in the long-run, will erode farmer returns, they believe.
Fonterra says the details of the three options are still being worked through and will go to the January meeting of the board of directors, before going to the Shareholders’ Council and then being discussed with farmers to get their feedback at a round of meetings January 31 to February 3.
Spierings says some farmers are worried that the Shareholders’ Fund might get too big. He reiterates that the proposal is for a 20% limit, and that there was no intention of allowing the Fund to get anywhere near that.
“We have talked about $500 million. That is eight per cent and much closer to the mark. It is likely to sit somewhere between 7 and 10 per cent.”
Spierings also says the board has insisted it must be able to unfold the Fund in the unlikely event it doesn’t work.
“The TAF project team is now finalising this work and we will be talking with our farmers about this at the January - February round of meetings, but the important thing is that we can unfold the fund if it is not working.”
