Fonterra gets green light for capital structure

Dairy company Fonterra says its new capital structure is set to be implemented in late March next year, after legislation to enable it was passed in Parliament.

The capital restructure, which needed changes to dairy industry legislation to proceed, was intended to make it easier for new farmers to join the co-operative and for existing farmers to remain, said New Zealand’s biggest business.

It would do this by allowing greater flexibility in the level of investment required. The implementation timing was subject to the relevant preparations being completed.

Fonterra needed Parliament’s green light for the long-planned restructure because it is a creature of statute, its formation from an industry mega-merger 21 years ago enabled by special legislation which allowed it to bypass Commerce Commission opposition.

Chair Peter McBride said the capital restructure would support Fonterra’s reset business strategy, with its focus on the value of New Zealand milk, by helping to maintain a sustainable milk supply, protecting farmer ownership and control, and supporting a stable balance sheet.

“Our co-operative is already making good progress towards our 2030 strategic goals, and we believe moving to our Flexible Shareholding structure will help ensure that we stay on track,” he said.

Fonterra, which has non-voting, dividend-carrying units listed on the NZX and ASX, would aim for new market-making arrangements to become effective before the capital rejig was implemented to help support liquidity. Fonterra would confirm the implementation date when its interim results were announced on March 16.