By Paul McBeth
Fonterra Cooperative Group will go back to shareholders one last time to get its Trading Among Farmers scheme over the line, after finding disquiet among global customers about apparent farmer opposition to the initiative.
Chairman Henry van der Heyden said a vocal minority of Fonterra shareholders had gained traction in the local media, and this was spilling over into the global domain, “damaging Fonterra’s reputation and our global partnership” despite overwhelming farmer support for the scheme at a vote in 2010.
“We have to put a stop to this and use the special meeting to unify the shareholder base so that we can get on with implementing the new refreshed business strategy,” van der Heyden said. “At the moment all we are doing is destroying value and compromising potential business opportunities.”
The dairy exporter plans to hold a special meeting of shareholders on June 25 to discuss the detail of the plan and give farmer-shareholders a final vote to approve the deal.
“We will be asking shareholders to exercise their vote, respect the majority decision of the vote and then move on,” van der Heyden said in a statement. “Anything else has the potential to be severely damaging to Fonterra’s future.”
Fonterra is looking for external capital to fund its global aspirations with the Trading Among Farmers project – a scheme that would enable farmers to sell the dividend rights of their shares into a fund, which would then be available for investors to purchase as units in a secondary market.
Last week, chief executive Theo Spierings said the dairy exporter plans to invest in a new Indonesian plant as part of its growth plans in Asia. Earlier this month Fonterra flagged a $100 million spend-up on building two new farms in China as it looks to produce 1 billion litres of milk in the world’s most populous nation by 2020.
Craigs Investment Partners has been appointed as the registered volume provider for the shareholders’ market, where the farmer owners can buy and sell shares among themselves.
Fonterra’s van der Heyden said the board and Shareholders Council will have completed due diligence on the trading scheme by the time of the meeting. If anything is discovered that is significantly different from the plan outlined in 2010 or needs further constitutional change, extra resolutions will be put to shareholders.
The new scheme also needs Parliamentary sign-off, and the primary production committee has until June 1 to report back to the House after the Dairy Industry Restructuring Amendment Bill passed its first reading earlier this month.
At the time, Labour Party commerce spokesman David Cunliffe said the scheme creates a tension between farmer-shareholders looking for higher farm-gate payments and investors in the fund seeking fatter dividend returns.