Sunday, July 3, 2022

Farmers wary of TAF outsiders

Fonterra’s dairy farmers are not yet attracted to the new opportunity of placing the economic rights of some of their co-operative shares into a fund backed by outside investment.

Theo Spierings: Strong support for the units among farmers and staff members “a vote of confidence”.

About 260 of Fonterra’s approximately 8000 shareholders indicated they want to place 5.5 million rights in total when the supply offer closed on November 21.

That is only about 5% of the minimum fund size of $500 million required to begin Trading Among Farmers (TAF) on November 30.

Therefore Fonterra will issue shares for the remainder, at least initially, to get TAF under way.

The issue will dilute the capital and affect the co-operative’s 2013 forecast earnings by about one cent over all approximately 1.6 billion shares.

Shares issued by the co-operative will be held by the Fonterra Farmer Custodian who will hold the economic rights for the fund. Fonterra does not intend to permanently retain the resulting equity.

The next opportunity for farmers to raise capital on some of their dairy supply shares will be after the interim results announcement in March.

Chief financial officer Jonathan Mason thought that low interest rates available, along with the desire to see how the units trade, are reasons for caution among farmers at present.

However, confidence in TAF is higher on the demand side, figures on the Friends of Fonterra fund unit offer disclose.

Some 900 farmer shareholders, 200 sharemilkers, 70 retired farmers, 260 Australian suppliers and 1300 Fonterra staff members have applied to buy units in the Fonterra Shareholders’ Fund (FSF).

Together with an undisclosed but presumed thousands of hopeful investors through their NZ sharebrokers, all of whom have been heavily scaled back from their offers.

When the TAF launch advisors have finished the final book-building exercise, among institutional investors and overseas interests, Fonterra’s board will decide the issue price.

The Friends of Fonterra, members of the investing public and institutions are all competing on the demand side of the $500 million fund, with the proportions allocated not yet disclosed.

Fonterra’s chief executive office, Theo Spierings, said the strong support for the units among farmers and staff members was very pleasing.

“We see it as a vote of confidence in the co-operative from some of the people who know it best,” he said.

However, directors spent much of last week dealing with issues around when chairman, Sir Henry van der Heyden, will retire.

After meeting about 80 concerned shareholders in Ashburton, chairman-elect John Wilson announced that van der Heyden would retire from the board next May.

Under the constitution, being less than six months before a scheduled annual election for board positions, a one-off election for van der Heyden’s seat won’t be held.

Wilson denied the retirement date was a negotiated outcome as a result of pressure on van der Heyden to stand down next month (Farmers Weekly November 19).

“It was always Henry’s intention to go next winter, so when we checked the dates, like the November annual meeting, next May’s board meeting will be his last,” he said.

“Farmers would not want us to have the expense of a one-off election for his replacement, so the six month-rule will apply.”

However, that does mean a second extended period of eight farmer-directors around the board table instead of nine, as has been the case this year since Colin Armer resigned.

Wilson had earlier used the disruptive risk of potentially up to five changes in a 13-person board as one of the reasons why van der Heyden had been asked to stay a further six months beyond the end of his chairmanship.

Along with independent director Ralph Waters, van der Heyden is a signatory to the TAF prospectus, another reason why both had unanimously been asked by directors to continue a further six months.

The Ashburton meeting was described as constructive

Some attending said they’d taken comfort from their concerns being heard and felt the meeting marked a line in the sand so that there was a sense of cohesion and moving forward together.

Four current directors attended the meeting and shareholders had come from throughout the country.

Disquiet over chairman van der Heyden remaining on the board past the December 17 annual meeting once Wilson takes up the chairmanship role had prompted a group of around 20 shareholders to write to the board in November urging directors to reconsider the wisdom of van der Heyden staying on.

One of the 20, Canterbury farmer Ron Ferriman, said the desire for shareholders to be given a definitive date for van der Heyden’s departure had come through strongly at the meeting and that had been noted by the four directors present.

He said concerns over governance and culture within the company were amicably discussed in a forthright manner and it was now important that the board, shareholders and Fonterra Shareholders’ Council all showed a united, outwardly focussed co-operative that could move forward and get on with backing the executive and management in driving Fonterra to further success.

The group’s concerns had not been personal but issues and culture based, he said.

Wilson said it wasn’t appropriate to comment on what went on in a shareholders’ meetings.

Challenges over politicking directed at van der Heyden have drawn a wave of support from shareholders for the long serving industry director and chairman with calls he be paid a greater level of respect given his 20 year service and dedication to the industry.

Hugh Stringleman and Anne Lee

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