Fonterra co-op will introduce its new capital structure in the spring

Farmer members approved the proposal to move to flexible shareholding in December 2021

New Zealand dairy co-op Fonterra will implement its new flexible shareholding capital structure in late March next year.

The co-operative, which is owned by over 10,000 farmers, says the new structure is intended “to make it easier for new farmers to join the co-operative and for existing farmers to remain, by allowing greater flexibility in the level of investment required”.

“Our co-operative is already making good progress towards our 2030 strategic goals,” said chair Peter McBride, “and we believe moving to our flexible shareholding structure will help ensure that we stay on track.”

Farmer members approved the new structure in December 2021, with an 85% majority.

Since then Fonterra has engaged with the government to push for changes to the Dairy Industry Restructuring Act that would allow it to make changes to its constitution. Parliament adopted the legislation on 24 November.

“This milestone gives us the confidence to put in place the transition to our flexible shareholding structure,” said McBride.

“We would like to take this opportunity to thank the government for passing the legislation through under urgency and giving the co-op’s shareholders this much needed certainty.”

The new structure gives share milkers and contractors the option of purchasing shares and lowers the level of compulsory investment. It also sets a new minimum shareholding at 33% of milk supply (around 1 share per 3 kgMS), compared to the current compulsory requirement of 1 share per 1 kgMS. The Fonterra Shareholders’ Fund will also be capped, a measure the co-op says will protect farmer ownership and control.

McBride said the timetable for implementing the new structure was based on various considerations, such as avoiding Fonterra’s share trading black-out period associated with the co-operative’s interim results.

“The black-out period would impact our ability to support liquidity in the market via the transitional buyback, which is part of the package of liquidity measures of up to NZ$300m that we have previously announced,” he added.

“It also gives shareholders time to fully digest the detailed information we will be sending through ahead of the implementation date, and to seek advice from their financial advisors. We are mindful that it’s a busy time on farm, and that advisors may not be available over the summer holidays.”

The implementation date will be confirmed once the co-op’s interim results are announced on 16 March.