Farmers buy $270 mill of Fonterra shares

Around one third of Fonterra's farmer shareholders have spent $270.7 million buying up new shares in their co-operative as part of changes to its capital structure. Fonterra's farmer shareholders have been given the opportunity to adjust their shareholding up or down, to anywhere between 100 and 120 per cent of their current or expected production, at a price of $4.52 per share. In November nearly 90 per cent of Fonterra farmers voted in favour of allowing themselves to buy into an extra 20 per cent of the co-operative. The move came as part of a three-stage restructuring of the business, as Fonterra said it required more capital to address risks to its balance sheet caused by farmers cashing in their redeemable shares reports The NZ Herald. The new shares would also help Fonterra's global and domestic growth. Previously, Fonterra farmers were only able to buy one share for every kilogram of milk solids they produced. Rather than adjusting shareholding up and down each season strictly in line with milk production, Fonterra farmers can now hold a buffer of up to 20 per cent additional "dry" shares not covered by their production. Out of Fonterra's 10,500 farmer shareholders, 3,461 have subscribed for a total of 60 million shares worth $270.7 million both to cover anticipated increases in production for the current season and as additional or "dry" shares in excess of production, while 59 applied to surrender a total of 1.6 million shares worth $7.3 million. Under the new capital structure,farmers now have greater flexibility in the number of shares they own in proportion to their milk production - rather than adjusting their shareholding up and down each season strictly in line with milk production.