Farmer vote a 'mandate', says Fonterra
Mon, 25 Jun 2012 6:29p.m.
By Tony Field
Fonterra's farmers have voted to allow outsiders to invest in the co-operative.
Fonterra says getting the plan passed was vital to its future.
Some farmers worry it'll weaken their control of the co-operative, but the vote was two-to-one in favour.
Farmers gathered at eight special meetings this morning. It was one last chance for Fonterra to convince them to back the plan.
When the votes were counted, 66 percent were in favour.
“We trust the board,” says farmer Carol Chamberlin. “They know a lot more than perhaps I do and my husband. So we are trusting them to do the right thing.”
“To me there are risks,” says farmer Hans Burch, “but there is a big opportunity for Fonterra. It's the only way forward.”
It was a relief for the Fonterra board, which had admitted there was no plan B if the proposal was rejected.
“Two out of every three votes was in favour,” says Fonterra chairman Sir Henry van der Heyden. “We think it is a mandate for us to proceed.”
Under the plan, farmers will be able to trade shares among themselves in a Fonterra shareholders' market.
They will also be able to sell them to a custodian, who can trade them in a new shareholders fund listed on the stock exchange. It'll be open to farmers and non-farmers.
Those shares would receive a dividend, but have no voting rights and would be capped at 20 percent of Fonterra's total shareholding.
Some farmers are concerned they'll lost full control of the co-operative.
“We just think it’s an unnecessary move,” says farmer Martin Breslin. “We just think it’s a distraction and totally unnecessary.”
Fonterra's chairman told farmers a simple 50 percent majority wasn't enough – that would be too divisive. He was looking for a mandate that signalled that farmers really did want change.
Farmer Alister McCahon had unsuccessfully put up a resolution to farmers that the plan only proceed if there was 75 percent support.
“Personally I believe anything less than a clear mandate is not in the interest of unity," says Mr McCahon.
Fonterra says the change is necessary to strengthen its balance sheet.
At the moment, whenever someone leaves the co-operative, Fonterra has to find the cash to buy their shares.
During the 2008 season, Fonterra spent $600 million into buying back shares – funds that could have been used to invest in the business.
Sir van der Heyden is hopeful the third of farmers who voted against the proposal will now get behind it.
“A couple of percent more would have been nice,” he says. “We've got a bit of work to do.”
Trading of shares in the new fund could begin as soon as November.
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