Fonterra farmers split vote, approve TAF by 66.45 percent
Fonterra Cooperative Group’s farmers have split their vote, saying yes to the Trading Among Shareholders scheme, with 66.45 percent approval, but missing the 75 percent approval required for constitutional changes that were proposed to protect farmer shareholders.
Farmers voted on two substantive resolutions today – the first, authorising the company to continue with TAF, needed a 50 percent majority. The second resolution, to create an ‘authorised fund’ with limits on its size and give farmer shareholders representation in setting the all-important Farmgate Milk Price got 72.8 percent support, having required 75 percent.
While chairman Henry van der Heyden had already said the first resolution would need more than just a bare majority for the Fonterra board to proceed, the two-thirds endorsement is judged sufficient for TAF to go ahead.
The mixed outcome will see Fonterra now attempt to put the second resolution to a second vote as it seeks to enact the biggest structural changes in Fonterra since the world’s biggest dairy exporter was founded in 2001, allowing farmers to sell the rights to the dividends on their shares. The rights would trade on the NZX as units in the fund. By approving TAF, the farmers are betting Fonterra can manage the competing needs to pay dividends and maximise payments they get for their milk.
“The board will take this resolution back to the next annual meeting in November and will seek Shareholders’ Council support for this,” chairman Henry van der Heyden said in a statement. “In the interim, further planning on TAF will proceed within the parameters outlined in Resolution 2.”
Two shareholder proposals to scrap TAF and to require a higher percentage of votes failed.
Fonterra’s board and executive had argued the cooperative needs permanent capital if it is to ‘seize the opportunities’ available in a global market where demand for dairy products is forecast to soar. In its worst year Fonterra was forced to redeem $742 million of shares after the 2007/2008 drought.
That’s a threat that has forced the company to “have hundreds of millions of dollars sitting there, just in case,” chairman Henry van der Heyden told Fonterra’s 10,500 farmers at video-linked meetings through New Zealand today.
Fonterra may well be capital-hungry as it looks to increase production worldwide. Chief executive Theo Spierings, who spoke from the Netherlands, said in China the company may have as many as 20 farms, from two currently. By 2020, some 4 billion litres of New Zealand milk may be exported to China with 1 billion litres produced locally, he said.
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