Overseas investment in Fonterra inevitable

Fonterra's constitution will eventually have to be re-written to allow for overseas investment if the co-operative ever wants to be a truly global player, a leading academic says. Fonterra yesterday revealed it had gained NZ$270.7 million in new equity through the purchase of additional shares offered to its farmers late last year. Waikato University chairman of finance Stuart Locke said the fact that Fonterra had only been able to raise NZ$270 million meant overseas investment in the co-operative was now inevitable. "If the are to be a major player in the world market they need a lot more equity," Locke said. Locke compared Kraft's US$26 billion buyout of Cadbury with the farmers' NZ$270.7 million share purchase, saying it paled in comparison writes The NZ Herald. "If Fonterra is operating on that sort of stage we are talking massive amounts of money, and that's beyond the scope of 10,000 shareholders." He said Fonterra was executing a "gradual program" over the next three to five years to encourage farmers to begin trading in dry shares, and then eventually accept foreign investment in the co-operative. Locke added that it was important that farmers retained control of Fonterra.  "The constitution could be amended to the point where 40 per cent of the shares can be traded amongst non-farmers, so the farmers always own 60 per cent ... the majority." Federated Farmers chairperson Lachlan McKenzie said farmers would never allow Fonterra's constitution to be amended to allow for overseas investment.