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.
Fonterra farmers are mulling TAF (trading among farmers) and casting their votes and Brown is looking for “a clear signal” to launch the scheme.
Fonterra’s board unanimously backs TAF and at least 30 of the 35 councillors support it.
While Brown isn’t willing to predict the June 25 vote, he acknowledges whatever the outcome unity among the 10,500 shareholders is paramount.
“If the vote is not definitive, then the unity among shareholders will be our number one priority,” Brown told Dairy News.
“Everything else drops. We need a clear sense of direction from shareholders. The board is unanimous, the council has given a clear verdict and now it’s up to shareholders.”
TAF is unpopular with some Fonterra shareholders. Brown says influence of outside investors through the Fonterra Shareholders Fund and the farmgate milk price are main concerns. He believes under TAF there are stringent checks and balances in place to ensure 100% farmer ownership and control. The council will have two representatives on the five-member milk price panel, a requirement that will be enshrined in the co-op’s constitution on June 25. The council will also receive regular reports from the Fonterra board on the fund size.
The council engaged independent advisors for separate due diligence. Brown says many meetings were held with the Fonterra board to ensure farmer concerns were addressed.
“If anything, we have strengthened farmer ownership and control with TAF.”
The TAF vote is not the end, he adds. “I’m confident we’ve climbed the hill and ownership and control has been locked down.
“But the fund and the fund size is the risk and we cannot let our guard down. The council will play a monitoring role to keep it within the parameters of policy.
Brown is “okay” with some councillors not agreeing with TAF. “We will never get 100% and I’m not using that as an excuse. I have no fear we have not done our job well. With a large shareholder base we get extreme views and that’s part of the healthy debate.”
But Brown believes the council has listened to the dissenting voices and responded to them.
Voting papers and TAF documents were sent to shareholders two weeks ago. Fonterra directors and councillors last week met shareholders throughout the country to discuss the plan.
Brown wants farmers to do their homework before casting their vote. “Get an understanding of TAF, get hold of your local councillors, talk to your neighbouring farmers, hold shed meetings.”
