More than 1,000 farmers turn up for crucial vote on TAF

Monday 25th June 2012

Some 1,185 farmers have turned up to vote today on Fonterra Cooperative Group’s Trading Among Shareholders scheme, which would end redemption risk for New Zealand’s biggest company while allowing outside investors to take a share of profits.

“We’re looking for a mandate today that signals you want us to get on with this change,” chairman Henry van der Heyden said from Hamilton. “Permanent capital means that a growing milk supply and growing capital base can be fully utilised” to seize the “enormously exciting” opportunities facing Fonterra.

Sources at the meeting in Hamilton said as many as 75 percent of the 10,500 Fonterra suppliers have already cast their vote online. 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. The second, which will create the ‘authorised fund’, is a constitutional change that requires 75 percent support.

Van der Heyden has said previously that TAF will not proceed unless there is a much stronger mandate than a bare majority on the first of the two resolutions, although has not specified what the Fonterra board would regard as an appropriate hurdle.

The vote is the most significant change to Fonterra since its inception 11 years ago, and comes after a protracted process of consultation.

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.”

Critics have said outside investors, which are likely to be well-organised institutions with experience of lobbying companies for a better deal, may be able to exert influence on the size of dividend payments versus what farmers are paid via the farm gate milk price.

“Yes, unit holders, like all stakeholders, can have a conversation, but that’s totally different from a vote on the co-op,” the shareholders’ council’s Brown said. But unit holders can’t force the hand of the board - “all they have is a voice.”

Fonterra hopes to have the results of the votes after 4 pm today and is required to release the results first to the NZX. If approved, the changes to Fonterra’s constitution would be effective as of today.

BusinessDesk.co.nz

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