Fonterra wants 'strong' farmer mandate for amended TAF scheme

Friday 1st June 2012

Fonterra Cooperative Group says it won’t go ahead with its contentious Trading Among Farmers scheme without a clear mandate from its farmer members. The cooperative’s chairman, Henry van der Heyden, said that while the TAF resolution could be passed with a simple 50% majority by its 10,500 shareholders, its board will not proceed unless it has a much stronger directive.

“I want a mandate that will unify the cooperative around this proposed evolution in our capital structure,” he said. The drawn-out TAF consulting and voting process has raised fears of outsiders taking over control of the farmer-owned business, which contributes almost 25% of New Zealand’s overseas earnings.

Van der Heyden said the proposed TAF scheme will sustainably protect Fonterra’s 100% farmer control and ownership into the future. “We have listened to our farmer shareholders and their key concerns rest on two fundamental points: Preserving 100% control and ownership and the integrity of the Farmgate Milk Price,” he said. Farmers will vote on limits to the size of the Fonterra Shareholders Fund, which is fundamental to 100% farmer control and ownership, van der Heyden said.

“We propose to decrease the threshold on the size of the fund from 25 percent to 20 percent of total shares, and decrease the number of dry shares on issue from 25 percent to 15 percent,” he said. The proposed fund will allow outside investors to buy units that offer rights to Fonterra’s share dividends though the units don’t carry voting rights.

The scheme will end Fonterra’s redemption risk. “While we intend to operate the fund at a size of 7 percent – 12 percent of total Fonterra shares on issue, we do need breathing room to take account of seasonal changes in milk volume,” van der Heyden said.

Farmers will also vote on enshrining protections for setting the Farmgate Milk Price in Fonterra’s constitution so that future changes would require a 75 percent-plus majority. Dairy farmers are receiving special voter packs detailing the TAF proposals, and a nationwide series of shed meetings will allow shareholders to ask questions of Fonterra’s board and management.

BusinessDesk.co.nz

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