FTA’S due dili­gence ex­haus­tive

Matamata Chronicle - - Rural Delivery/opinion - By TONY WILD­ING

As a direc­tor of both New Zealand Dairy group and Dairy Board be­fore the for­ma­tion of Fon­terra I have been fol­low­ing very care­fully the build­ing of not only the case for Trad­ing Among Farm­ers but the cus­tom-made so­lu­tion for us to con­sider now.

I share the frus­tra­tion of many on the time taken to get the fi­nal blue­print in front of share­hold­ers; that’s why I have waited un­til now to comment.

I, along with many share­hold­ers have been an­noyed by the pre­ma­ture com­ments from peo­ple stat­ing the­o­ries and out­comes ahead of hav­ing all the in­for­ma­tion.

This model can­not be found in text books and should not be com­pared to mod­els by other co-ops that let out­side in­vest­ment in or failed to con­trol their dry shares.

This model has been care­fully crafted and cus­tomised for the needs and pro­tec­tion of the co-op, Fon­terra.

What I am in­ter­ested in and I en­cour­age share­hold­ers to take note of is that highly qual­i­fied, lead­ing, cred­i­ble an­a­lysts have stress-tested what is in front of us now.

The names on the sheet of the due dili­gence com­mit­tee and the ex­haus­tive process they have un­der­taken gives me great com­fort.

From Mur­ray Gough an ex-Dairy Board chief ex­ec­u­tive and co-op com­pany direc­tor with great un­der­stand­ing of co-ops to Colin Giffney with 40 years’ ex­pe­ri­ence in cap­i­tal mar­kets and cur­rently deputy chair­man of the takeovers panel along with all the skills of the other six panel mem­bers, bring the best minds to bear on this pro­posal.

There can never be no risk in change and equally that has to be balanced against the risk of do­ing noth­ing.

Hav­ing been part of a board when ma­jor de­ci­sions have been made I know only too well the feel­ing of in­tense re­spon­si­bil­ity that the board and share­hold­ers coun­cil have and are still go­ing through.

The risks around the milk price and the in­flu­ence of non-vot­ing in­vestors in a unit trust are over­stated and I be­lieve nonex­is­tent or at worst con­trolled.

The milk price model will evolve over time due to tech­nol­ogy and new prod­ucts with or with­out TAF, that is not a risk but rather a re­al­ity. The key thing is that it is and will be Fon­terra that sets the price.

A lot is be­ing said about in­vestor be­hav­iour.

If in­vestors are un­happy they will take their money else­where like they do now, daily, in the share mar­ket. In a fund of the size we are sanc­tion­ing, less than 20 per cent of the com­pa­nies eq­uity with no votes for unit in­vestors, that’s what they will do.

It is rather fan­ci­ful for some to lead us to be­lieve they will go to the au­thor­i­ties and de­mand cer­tain rights which they don’t have un­der this pro­posal.

The be­hav­iour of in­vestors be­ing de­scribed by peo­ple op­posed to TAF re­quires two things, crit­i­cal mass and vot­ing rights; TAF al­lows nei­ther.

The same peo­ple who are com­plain­ing today that the pack­age is too com­plex would equally be the first to crit­i­cise if it was sim­ple and claim in­vestors could find loop-holes and gain con­trol.

From my per­spec­tive it is time to back the lead­er­ship we have elected and get on with it.

The man­date both the board and coun­cil are giv­ing is very strong.

The 48 peo­ple who have lived and breathed this pro­posed change over the last cou­ple of years have not taken this de­ci­sion lightly.

We some­times for­get we spent more than three years to put Fon­terra together, which ini­tially didn’t sit well with some and be­lieve me did not come with­out risk.

We iden­ti­fied the risk and your board over the last 10 years has de­liv­ered on the pro­posed ben­e­fits; if any­thing it has ex­ceeded the sav­ings in the global sup­ply chain.

This would have been dif­fi­cult if not im­pos­si­ble to achieve un­der the pre­vi­ous struc­ture.

I have been pleased to see the pro­posed changes in the con­sti­tu­tion on both fund size and dry shares but more im­por­tantly the pol­icy around man­ag­ing the size and the dis­ci­plines on the com­pany em­bed­ded in the con­sti­tu­tion.

If share­hold­ers have not at­tended a meet­ing then they should read the in­for­ma­tion sent by Fon­terra and sup­port this pos­i­tive step for­ward for the co­op­er­a­tive.

A strong man­date is needed so the board and man­age­ment can get their at­ten­tion back on the ex­cit­ing op­por­tu­ni­ties in front of Fon­terra to con­tinue to build and im­prove on our strong global po­si­tion.

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