Herd production performance soars
New data released by LIC and DairyNZ shows New Zealand dairy farmers have achieved the highest six week in-calf rate and lowest notin- calf rate on record.
A proposal from the LIC board and management is being put to shareholders this week: to split LIC into a genetics company and an agritech company by December 1.
The genetics company will remain a 100% farmer-owned co-op; the agritech company may call on key investors to raise capital next year, subject to shareholder approval.
LIC chairman Murray King told Rural News no shareholder vote will be required to split the company into two; LIC's technology and animal husbandry business units will be offloaded to LIC Automation, already operating as a subsidiary.
However, a 75% 'yes' vote will be required to make constitutional changes to allow new shareholders into the agritech company.
King says another roadshow will be held next year before shareholders vote for changes to the LIC constitution.
LIC's board and shareholders have been talking about capital structure changes for two years. A diversified shareholder base of farm owners, sharemilkers and farm equity partners has given rise to tension within the co-op.
"The ambiguity of the existing capital structure creates tension between the interests of classes of shareholders and farmer customers; this was a hindrance to the delivery of strategy," says King.
During a shareholder roadshow last year a wide range of expectations was discovered among shareholders: some wanted returns via dividends, others preferred growth in share value, most wanted new and innovative products and services.
King says it was clear all shareholders wanted "cows in calf to quality genetics, and information to manage herd and farm. And some wanted us to stick to our core business of genetics and not to go into non-mainstream businesses like technology."
LIC sees great opportunity for the intellectual property it has developed, but funding is needed to develop and grow the automation and sensing business.
King says a lot of global companies have expressed interest in working with LIC on the agritech company.
"We know, given the current environment, there is little appetite among shareholders for investing in agritech. But every business needs to grow; if we don't keep moving we will get behind."
King says while LIC has a small international business, it has mostly relied on the 11,000 farmers in New Zealand to make money.
The agritech company will allow it to tap into the strong market opportunity offshore without exposing farmer shareholders to direct risk.
LIC capital structure shake-up
• A herd improvement co-op 100% owned by farmers
• An agritech company that will allow outside shareholders and capital subject to shareholder approval
• Separate businesses to operate by December 1, 2016
• Shareholder roadshows to discuss board proposal
• Board will give update at the annual meeting in October.
