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.
Guiney, gagged by Fonterra with a court injunction, hopes the court case will be finalised before nominations for board elections open in July.
Fonterra obtained an ex-parte injunction against Guiney and media outlets on March 2 to prevent confidential board information being made public.
Guiney told Rural News she has filed her defence and is suing the co-op for defamation. The case is set for hearing on September 15.
A fierce defender of Fonterra’s co-op ethos, the South Canterbury farmer served for three years on the board as a farmer-elected director. She was prevented from re-contesting last year.
Guiney says she hasn’t decided on contesting this year’s board elections; if a settlement is reached earlier she could then make a call.
She says Fonterra’s injunction is baseless and she never divulged any confidential board information to the media.
However, Guiney is questioning the board’s attitude to losses on investments in China, especially in the controversial Beingmate joint venture; the co-op paid $750 million three years ago for its 18.8% stake, but after the latest write-down of $404m the Beingmate investment is now worth only $244m.
Fonterra’s board is now focusing on the ‘enterprise value’ of its China operations, notes Guiney.
“This tells us nothing about shareholder value and is misleading; they are not only misleading shareholders but misleading themselves.”
Guiney says Fonterra shareholders have been contacting her to support her stance on the prudent use of shareholder capital. She is urging the Fonterra board to be more transparent with shareholders.
“A strong Fonterra in future will depend on much better performance with capital. This would require an open and non-defensive acceptance of issues that the [financial] results suggest exist [because of the] investment culture, in order to improve it.”
Guiney says the days of easy access to shareholder capital may be over for Fonterra.
“The easy access to capital Fonterra has enjoyed with milk growth for almost the 15-year board tenure of the current chairman is over, because the growth of milk into Fonterra is over.
“The attitude that a $400m write-down of one investment is small in the scheme of things is not sustainable in a cooperative attracting no new capital,” she said.
“In my opinion it’s not acceptable regardless of whether you have easy access to capital or not, but it’s even less acceptable in an environment where Fonterra is losing market share as fast as competitors can build new stainless steel.”
