Fonterra shareholders urged to vote with Cabinet eyes on new capital plan

Fonterra chairman Peter McBride says with the agriculture minister closely watching farmer-shareholder turnout on this week’s capital restructure vote, 11th-hour votes are needed.

Online voting for the big dairy co-operative’s restructure proposal – and other resolutions for Thursday’s annual and special shareholder meetings – closes at 1pm on Tuesday and reopens during the meetings.

McBride said he was not permitted to disclose figures, but voting as at Monday was tracking slightly above normal shareholder voting patterns “but for such a significant vote we need as many as possible”.

Only Fonterra’s 10,000 farmer-owners can vote.

“We are happy but it could be better. Turnout is one of the things the minister will be interested in.”

As if a 75 per cent vote of shareholder support wasn’t a tough enough ask, McBride and his board have still to persuade Agriculture Minister Damien O’Connor their plan is a good idea.

The notice of the December 9 shareholder meetings in Invercargill included a letter fromO’Connor, which pours cold water on aspects of the package.

O’Connor and Cabinet need to approve a capital structure change as Fonterra is a creature of statute, created from an industry mega-merger to be a “national champion” under special legislation, the Dairy Restructuring Act (DIRA) in 2001.

In his letter, which McBride released in the interests of transparency, O’Connor said the current proposals envisage a legislative change to remove key mechanisms that risk weakening performance incentives on Fonterra.

“Without alternative measures, I am not yet assured that these proposals would deliver the best long-term outcomes for farmers or the dairy sector as a whole,” the letter reads.

O’Connor said the proposals as they stand are not consistent with the Government’s policy objectives and the purpose of DIRA.

McBride previously told the Herald he read the letter as supportive “in the context of achieving [an outcome] in the best interests of all New Zealand dairy farmers, not just Fonterra farmers”.

If shareholders give the capital restructure the green light on Thursday, it could take several months to work it through with O’Connor and officials.

McBride said O’Connor would likely be this week looking for a strongly positive shareholder response – in turnout and sentiment. Shareholders will be able to participate in the meetings online.

“Potentially he will be looking at the result of other resolutions too – not just that. The level of support for directors, the level of support for other resolutions,

“If we come out with a strong united front, that’s powerful.”

McBride said O’Connor would also be provided with further expert analysis of the restructure plan, some of which was not available to him earlier. Some of that work had been commissioned by the farmer-only Fonterra Cooperative Council which has voted 92 per cent in support of the proposal.

He said there was “philosophical alignment” between Fonterra leaders and O’Connor.

“… We are confident that a regulatory framework is there that will support a flexible structure for Fonterra. He [O’Connor] talks about resolving this in a timely fashion.”

Fonterra leaders have been consulting with farmers on the proposals since May, and made several changes recently to the original framework in response to feedback.

McBride believes shareholders are positive about the proposal.

“Based on the changes we made and the (September release) of the 10-year strategic plan made sentiment more positive. We would have changed the proposal again before we put it to the vote if we thought it wasn’t going to be successful.

“We went into the vote reasonably confident.”

McBride was confident Fonterra’s largest shareholders had voted as they tended to be regular engagers.

Fonterra farmers might not yet have voted in the numbers leaders would like to see because they’re in the money, with the company forecasting a record $8.70/kg milksolids payout midpoint this season from a forecast range of $8.40-$9.

When dairy farmers are happy with the milk price they tend to be less querulous.

“It’s because they are positive and the money is good,” said McBride.

“And we’re not in a Taf-type situation. And we don’t have a campaign running against the company.”

Fonterra’s last effort at a capital restructure in 2012 was divisive and corrosive. It resulted in Taf, Trading Among Farmers, which saw units in farmer-owned shares listed on the sharemarket. The dividend-carrying, non-voting units could be bought by outsiders. Only farmers can own Fonterra shares.

This unit fund, the Fonterra Shareholders’ Fund, will be restricted and capped under the new proposal.

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