Capital review a 'cop out'

p>Hayes, a third-generation dairy farmer who is giving up milking cows at the end of this season, believes that Fonterra not freezing the share price before releasing details of the capital structure is irresponsible.

“They were always going to risk downward pressure to the share price,” he told Rural News.

This is bad news for farmers like Hayes, who are exiting the dairy industry on May 31.

Following the release of Fonterra’s capital structure review details, Fonterra’s share price nosedived from $4.56/share to $3.46 early last week.

By Thursday last week it had recovered slightly to $3.76.

Hayes claims Fonterra is manipulating the immediate share price from here on and will financially benefit from its own restructure announcements.

“The timing to release the restructure details four weeks out from the share compliance date of June 7 will first and foremost affect the exiting farmer’s ability to get a fair price when cashing in their wet shares once this date rolls over,” he told Rural News.

“Furthermore, on June 1 the exiting farmer will cease to be a co-operative member.”

Hayes says that means these farmers facing the biggest and most immediate depreciation of share capital, “will not have a voice at the table through the upcoming consultation process.”

Fonterra has a policy where exiting shareholders can sell one-third of their shares annually over three years, but Hayes points out that there is little chance of the share price recovering.

With Fonterra imposing a cap on the Fonterra Shareholders Fund and suspending share trading in the Shareholders Market, farmers don’t have the option of transferring any share capital to the Fund and ride out the downward pressure in share price.

Hayes says Fonterra must honour its constitution and allow exiting farmers to leave with their “un-manipulated” fair share value.

He wants the co-op to freeze the share price at $4.59 (the preannouncement price) for the duration of the consultation and vote, just as they did for the last capital structure review and remove the temporary cap on the Fonterra Shareholders’ Fund.