Shareholders in New Zealand dairy co-op Fonterra have given its new capital structure the green light at a special meeting in Invercargill.
The co-op wants to move to more flexible shareholding structure, allowing farmers to hold fewer shares and widening the pool to include sharemilkers, contract milkers and farm lessors as associated shareholders.
It hopes this will make it more competitive against rival processors which don’t require farmers to stump up money for shares in order supply milk – which Fonterra says has led to a loss of market share.
Chairman Peter McBride says the board and management are united in the belief that the flexible shareholding structure is the best course of action.
“Our farmers have agreed,” he said. “We have received a strong mandate for change with 85.16% of votes cast in favour of the proposal and 82.65% of eligible votes being cast.
“Changing our capital structure is the most important decision we as farmers have made in almost a decade. The results of this year’s resolutions were all above 80%, which shows farmers are united in their support for the direction of the co-op. Our full focus is now on delivering the strategic commitments we have made.
“I would like to thank everyone who voted and the thousands of farmers who gave us their time and ideas during the consultation period, which helped us to shape the proposal into the model that was successfully passed today.”
Fonterra says ot will continue working with the government on how the decision can be given effect under the Dairy Industry Restructuring Act, the legislation that enabled the formation of Fonterra \ in 2001.
“I believe we are philosophically aligned with the government and remain confident that we can find a regulatory framework that supports the Flexible Shareholding structure,” said Mr McBride.
“The strong mandate we received today will support our conversations with the government as we continue to work together to find a mutually acceptable outcome.
“We will continue to keep farmers and unit holders updated as these conversations progress.”
The flexible shareholding structure will come into effect once the board is satisfied that any steps necessary for implementation have been (or will be) completed. Fonterra says it is aiming to implement the changes as soon as possible from the beginning of next season.
Share compliance obligations will remain on hold until at least six months after the new structure is effective. The current cap on the Fonterra Shareholders’ Fund remains in place as a cap is a feature of the flexible shareholding structure.
Federated Farmers Otago dairy chairman Luke Kane told the New Zealand Herald it was a “positive” move for farmers which would help with succession issues in family farms and make it easier for young members to join.
“If you’re buying a farm today and you’ve got a limited amount of capital to buy the farm and the cows,” he said “and you don’t have the capital to buy the shares straight out for all of your production, you can buy one-third of those. It allows you to raise capital over time.”
Meanwhile, Fonterra has announced an investment of around NZ$4bn (£2bn) by 2030 to move milk into higher value products, pursue growth, and reduce emissions.