TAF vote update outside shareholders get a voice, but not a vote

Monday 25th June 2012

Outside investors who get a share of Fonterra Cooperative Group’s profits by owning units in its proposed shareholders’ fund will have a voice in the running of New Zealand’s biggest company, but not a vote, chairman Henry van der Heyden has told farmer shareholders at today's historic special meeting.

The rights and powers of outside investors in the fund was a key issue for speakers during meetings across the country today on Trading Among Farmers, the scheme that aims to remove redemption risk from the cooperative on which Fonterra's 10,500 farmers must vote by 4pm today.

The units provide rights to the dividends of shares without the equity itself being vested in outsiders. But those investors will be consulted on matters including the appointment of directors.

“Yes, a conversation is had” with the unit fund holders, van der Heyden said. “There will be discussion by the board, led by the chairman, and the unit fund.”

Opponents, such as Fergus O’Connor, a dairy farmer from the Nelson region, had their allotted two minutes to speak, though the whole meeting was couched in generally polite terms and ended punctually at 1:36pm.

“I distrust it and I realise a lot of broken co-ops have tried to do what we’re doing,” O’Connor said on a video-link to the main meeting in Hamilton.

Murray Beach, a shareholder from Havelock who put a resolution to dump TAF, said he took on two mortgages to buy shares in Fonterra only to find the company won’t now give it back if the trading scheme is introduced because the responsibility will have shifted to the fund.

On outside investors, “if they put money into the co-op they will want a return on their money,” Beach said. “If they take a portion of milk from the cow there’s less left for the farmer.”

Lindsay Blake, a high-profile opponent of the scheme, said bringing in outside investors was like “marrying someone whose connection to the cow is the froth on their cappuccino.”

“The outside investor will not be as sympathetic,” she said.

Other speakers were strongly in support and Fonterra sources were quietly confident the measures will be approved, with some 75 percent of votes already believed to have been cast by online and postal voting.

“TAF is a move to adapt and improve Fonterra for the future,” said Richard Myers, at the main meeting in Hamilton.

Results are expected to be announced around 4pm, with a statement required to go to the NZX in the first instance.

The farmers are being asked to decide on two resolutions. The first, giving the company the mandate to continue with TAF, requires a 50 percent majority, although TAF will only proceed if support is well in excess of a bare majority. The second, which will create the ‘authorised fund’, is a constitutional change that requires 75 percent support.

TAF won support of the majority of the Shareholders’ Council after what chairman Ian Brown called “19 significant revisions” to protect farmers.

As a result of that process, the threshold of the fund would be cut to 20 percent of total shares from 25 percent. The threshold on the number of dry shares on issue will be reduced to 15 percent from 25 percent of total shares; and a cap of 33 percent would be put on how many wet shares a farmer can sell the economic rights to in the fund.

Brown says the board aims to manage the actual size of the fund at 7 percent to 12 percent of shares on issue but wants the limit set at 20 percent to enable the fund “to breathe in and out through the peaks and troughs.”

BusinessDesk.co.nz

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