Farmer-shareholders get Fonterra choice
Arecord 3000-plus farmers turned out to Fonterra’s national round of shareholder meetings. The farmer-owned co-operative has started collecting responses to three options put to shareholders on the contentious issue of a ‘‘custodian’’ for the legal title of their shares under the trading among farmers (TAF) plan.
A company spokesman said there was no closure date as yet for feedback.
However, with a November introduction for TAF in their sights, Fonterra directors told shareholders a ‘‘TAF training package’’ beginning in June had been set up for them, as well as for sharebrokers and rural professionals.
After a backlash last year from shareholders to news they would have to surrender legal title to their shares to a custodian if they engaged in aspects of the share trading proposal, Fonterra leaders went back to the drawing board and last week presented rattled farmers with three new options around the custodian issue.
Option one was a Fonterra-owned custodian; two, a farmer trust custodian; three, retaining legal title with farmers.
Farmers heard that the board recommended option two, which would see the custody of shares invested in the proposed Fonterra Shareholders Fund owned by a trust controlled directly by farmer-shareholders.
While option three at first blush would appear the easy choice for farmers worried about losing control and ownership of Fonterra to market investors who will be invited to invest in listed units of Fonterra shares under TAF, Waikato Federated Farmers president James Houghton noted that as an investor, he would not want to put money into a company where the shares were tightly held by Fonterra farmers.
Fonterra is proposing TAF as part of an ongoing capital restructure to secure its balance sheet from washout when farmers want to exit the co-operative and cash in their milk supply-linked shares.
The world’s leading dairy exporter also wants the extra capital unit investors could provide to further its growth ambitions. But some farmers with cold feet fear TAF is the first step to Fonterra being listed on the sharemarket.
Under the proposal, farmers would be able to place shares with a Fonterra Shareholders’ Fund and be paid the share value for the rights to dividends and any change in market value, while retaining voting rights.
When a farmer wanted to place shares with the fund they would place a sell order on the fund market and once a trade was matched with a unit investor the farmer would transfer the share to a custodian, which would hold the legal title.
To regain the economic interest of shares, farmers would need to buy new shares or units, which could be converted back into shares by applying to take them out of the custodian’s ‘‘locked box’’.
Farmers have yet to get hard TAF details, and their watchdog shareholder council has yet to OK TAF, but with farmers having voted overwhelmingly for the concept in 2010, the directors are clearly forging ahead with their plans. At last week’s meeting they said: ‘‘All going well, we expect the final TAF package to come before the board in the first half of the year and council by August this year for approval.’’