Fonterra considers listing on stock exchange
Fonterra is initiating a two-year consultation to adopt a preferred capital structure that could see it split in two and list on the New Zealand Stock Exchange.
The co-operative – formed six years ago out of a three-way merger between New Zealand Dairy Board, New Zealand Dairy Group and Kiwi Co-operative Dairies – is owned by some 11,000 farmer shareholders in New Zealand (96 per cent of the country’s dairy farmers), who supply it with milk and, in return most of the income is distributed among them.
However the board of directors has been weighing up six options for changing its capital structure with a view to ensuring it stays relevant, competitive and adaptable in the changing dairy market. The capital structure plan would see the Dairy Co-operative listing its business operations in a separate company, while maintaining a controlling interest. The farmer co-operative would remain 100 per cent owned and controlled by farmer shareholders, but all the assets, liabilities and operations of the co-operation would shift over to a second company.
The plan is for this second company to be farmer owned for two years, but ultimately for shares in this to be listed on the New Zealand Stock Exchange. The farmers would own about 80 per cent of the listed entity – 65 per cent through the co-operative and 15 per cent through their shareholding. The remaining 20 per cent would be up for sale to the public. The consultation process will involve two shareholder votes, with the first expected to take place in May.
This will be on whether to change the structure of the business to two entities, and introduce a more transparent milk pricing mechanism. At least 75 per cent shareholder approval will be needed for the proposal to pass through to the second stage
Seventy-five per cent will also be required for the second vote, which would take place in 2010, on whether Fonterra should list on the stock exchange and introduce external capital.
