First Milk co-operative reshapes its capital structure

The largest dairy farmer co-operative in the UK, First Milk, has announced plans to change the capital structure of the business. The initiative forms part of First Milk’s...

The largest dairy farmer co-operative in the UK, First Milk, has announced plans to change the capital structure of the business.

The initiative forms part of First Milk’s turnaround plan to stabilise the enterprise.

Commenting on the decision, Clive Sharpe, chair, said: “First Milk has made significant progress over the last nine months. We have reduced employee numbers, cut overhead costs, addressed quality issues and established a new governance structure. We have also refinanced the business with our lenders and disposed of our Glenfield business and our shareholding in Westbury Dairies.”

The change will see First Milk converting its members’ loan capital into equity. This means that the money required to run the business which was raised from loans will be raised from equity capital instead, creating tradable shares.

“A final element of our turnaround plan is addressing our capital structure. Hence we have communicated to members and ex-members our intention to convert farmers’ loan capital into equity. In due course we will be confirming the type of equity to be issued; tax considerations for members and former members; and how returns on equity might be paid in future.

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In response to First Milk’s announcement, National Farmers Union chief dairy adviser, Sian Davies, said: “We understand that First Milk has faced a number of challenging decisions over the last few months, but farmers will be concerned if the announcement results in a negative financial impact on their businesses at what is already a very difficult time.

“For many former First Milk members who have already had their repayments delayed, this will be seen as a backwards step and another obstacle to the release of their historical investment in the business. It is critical that First Milk keeps talking to its members about its overall strategy and turnaround plan.”

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