Proposed changes to Fonterra's capital structure would allow farmers to buy up to twice as many shares in the cooperative as they have previously been allowed, and then to trade shares among themselves.
Proposed changes to Fonterra's capital structure would allow farmers to buy up to twice as many shares in the cooperative as they have previously been allowed, and then to trade shares among themselves.
The cooperative plans to set up a "shareholders fund" to help farmers buy shares -- or retain shares they would otherwise have to sell -- by paying shareholders for the right to receive dividends and pocket any gains from changes in the share values.
The fund would raise the money it needed to pay farmers by selling investment units to "friendly investors" such as sharemilkers and retired farmers, with investment institutions and the public also be able to participate.
Farmers could buy back their entitlement to dividends and any change in the share price when they wanted to, at the prevailing market price.
Outside investors would not have any voting rights in the cooperative, and the total number of shares in the cooperative would remain at 120 percent of the number of kilograms of milksolids produced.
The proposal is an effort by Fonterra to quit its redemption risk from having to find a lot of cash to buy back shares if a large number of farmers decide to downsize their production, or quit Fonterra, which has said it feared such a scenario if an international rival set up in New Zealand and began paying higher prices for milk.
It said today the new structure would mean more flexibility for farmers to buy and sell Fonterra shares to match their cash flows, while providing Fonterra with permanent share capital to grow shareholder returns.
Farmers will be able to trade their shares among themselves on any business day, using an online system or by calling an 0800 telephone number, or the can leave it up to cooperative to buy and sell shares on their behalf at the end of the season.
At present, farmers are issued with shares, or sell them back to the cooperative once a year, at a price set by directors.
Farmer shareholders last year agreed to allow cooperative members to hold up to 20 percent additional "dry shares" beyond their current or expected milk production levels.
Fonterra chairman Sir Henry van der Heyden said the proposed "Trading Among Farmers" would strengthen the cooperative's balance sheet as well as providing more flexibility for shareholders to run their businesses.
The proposal would require 75 percent support of farmer shareholders in a vote.
