Giant dairy co-operative Fonterra has put all its shares into a trading halt ahead of launching what it terms a "comprehensive consultation process" to seek feedback from its farmer shareholders options for changing its capital structure.
Fonterra said it would be making an announcement on Thursday (May 6) and the trading halt on its shares would be in effect till Friday (7th) to "provide Fonterra shareholders and unit holders a full day to review and consider the materials before trading recommences".
Presumably the "materials" refers to a package of proposed options.
It will be very intriguing to see what Fonterra has come up with.
It was also in 2019 that Fonterra announced a 'back to basics' strategy after reporting a financial loss of over $600 million due to a disastrous debt-funded global expansion plan.
Since then it has recovered well. However, having a fit-for-purpose capital structure for the future is vital for the co-operative to enjoy future success.
At the moment only farmer shareholders may directly invest in Fonterra. But there are also Fonterra Shareholders Fund (FSF) units, which are open to all investors and which offer benefits and dividend returns from the performance of the co-operative - but no decision making power for the co-op. The FSF units also provide a mechanism for farmer shareholders of the co-operative to sell their shares.
Farmers have long opposed the idea of outside investors directly investing in the co-operative.
And this clearly remains the case.
As part of the build up to the moves Fonterra is now making, it earlier this year conducted an online survey to flesh out some of the views of its farmers.
This again produced a resounding thumbs down to the idea of outside shareholders investing in the co-operative.
How Fonterra accommodates these sentiments while tackling its need for fresh capital will be very interesting to see.
Fonterra said on Wednesday it "remains in a strong financial position and the consultation process will not affect the co-operative’s ability to operate".