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.
With Fonterra farmers voting overwhelmingly to support a new flexible shareholding structure, the co-operative now needs O'Connor's support to facilitate regulatory changes to the Dairy Industry Restructuring Act (DIRA).
O'Connor had earlier expressed reservations with the proposal. But McBride told Rural News that O'Connor was pleased with the positive outcome and the strong farmer support.
The proposal received 85.16% support among farmer shareholders. Turnout was 82.65%.
"The review process we conducted and the turnout was pretty important to the Minister," says McBride. "The strong mandate from farmers also helps."
McBride says the co-operative will now work with Ministry for Primary Industries and O'Connor's office to help prepare documents for Cabinet. A select committee hearing may also be on the cards.
Fonterra Co-operative Council chairman James Barron says farmers have clearly spoken.
"Farmers also know that Minister O'Connor has previously lent his support to farmer-owned co-operatives," he told Rural News.
The consultation process started in May and more than 5000 farmers either made online submissions or gave feedback at meetings.
McBride says he is chuffed with the result.
"It doesn't get any better than this, does it."
He says he is a bit worn out after several months of farmer meetings, but enjoyed getting to meet many shareholders.
The new flexible capital structure would reduce the number of shares farmers need to hold to join the cooperative from one share per kgMS to one share per 3kgMS.
It would also allow different type of farmer to hold shares in the company, and cap the size of the associated shareholders' fund to 10% of all shares on issue.
The changes were aimed at securing Fonterra's financial future and retaining farmers, amid the prospects of falling milk supply and competition from other milk processors that do not requires capital investment from farmers.
McBride admits he wasn't very confident at the start of the process.
"But as we clearly articulated our position on the 10-year plan and made changes to the proposal based on feedback, I grew more confident.
"Six weeks ago, I started feeling pretty confident but you are not sure until the voting results come out."
Barron says a huge amount of work has gone into the consultation process with farmers.
"Farmers are facing other challenges at the moment and this was another challenge on top of those," he says.
"But this was highly important to farmer shareholders and they engaged and provided high feedback to us."
Barron says the work on capital structure doesn't stop here.
"There's a big job ahead to get the regulatory approval needed."
