FTA’S due diligence exhaustive
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.