Fonterra Shareholders Fund (NZX: FSF) Fonterra Starts Consultation on Capital Structure Options

Thursday 6th May 2021

Today Fonterra is starting a consultation process to seek farmer feedback on potential options to change its capital structure that could give farmers greater financial flexibility.

To allow its farmers to have open conversations and consider all options during consultation, the Co-operative is temporarily capping the size of the Fonterra Shareholders’ Fund (the Fund) by suspending shares in the Fonterra Shareholders’ Market (FSM) from being exchanged into units in the Fund.

This temporary cap will be effective once the current trading halt is lifted when the market opens tomorrow and will remain throughout the consultation process.

Chairman Peter McBride says the capital structure review seeks to ensure the sustainability of the Co-operative into the future.

“The Co-op’s future financial sustainability relies heavily on our ability to maintain a sustainable New Zealand milk supply and protect farmer ownership and control.

“The decisions we’ve already taken in response to the findings of the review – like temporarily capping the size of the Fund – haven’t been made lightly. We appreciate they will have come as a surprise, but they are necessary to keep all our options open while the Co-op’s farmer shareholders have a free and frank conversation about our capital structure,” says Mr McBride.

Some of the options the Co-operative is asking its farmers to consider include buying back the Fund. If the temporary cap was not in place, anyone holding ‘dry shares’ – those shares held in excess of the ‘wet share’ requirement linked to milk production – would have been able to exchange them into units in the Fund during consultation. This could have more than doubled the size of the Fund and made the option of buying it back unaffordable in the context of the Co-operative’s current balance sheet targets.

Capital structure options the Co-op is consulting on

The Fonterra Board has spent a significant amount of time looking at a wide range of options, including staying with the current structure. Some of the alternative structures they’ve considered include:

- dual share structures, which would move from the current single Co-operative share to a compulsory supply share and a separate non-compulsory investment share

- unshared supply structures

- a traditional nominal share structure

- a split co-operative model

Please see the links below for details

Fonterra starts consultation on capital structure options

Presentation slides

Consultation Booklet

Frequently Asked Questions

Source: Fonterra Shareholders Fund

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