The legislation enabling Fonterra to undertake its capital restructuring has passed its final reading in parliament.
Fonterra confirmed on Friday morning that the new structure should be in place by March.
The Dairy Industry Restructuring (Fonterra Capital Restructuring) Amendment Bill passed its third reading with the support of Labour, National and the ACT party. The Green party and Te Pati Māori opposed it, as they did during the first two readings.
At Fonterra’s 2021 annual meeting, the dairy exporter’s supplier-shareholders voted in favour of a new capital structure making it easier for farmers – such as sharemilkers, contract milkers and farm lessors – to become members.
The new structure set out a new minimum shareholder requirement of one share per 3kg of milksolids produced, down from the current one-for-one requirement.
Fonterra needed a legislative change to enable the restructuring, with the government seeking greater independence on the co-op’s milk price panel and stronger oversight of its base milk price-setting arrangements.
Earlier in November, Parliament’s primary production select committee made minor tweaks and the Bill went through its second reading last week.
The Bill is one of 25 the government is trying to make progress on this week while Parliament sits under urgency.
As well as allowing for Fonterra’s new structure, the Bill also aims to improve the transparency and robustness of the co-op’s base milk price-setting arrangements by increasing the number of ministerial nominees to two on the milk price panel.
The panel’s chair also has to be fully independent of Fonterra and appointed only with the approval of the minister.
It also gives the Commerce Commission the power to issue binding directions to Fonterra on matters arising from its reviews of Fonterra’s Milk Price Manual and base milk price calculation.
Agriculture Minister Damien O’Connor said the Bill strikes a balance by supporting Fonterra’s shareholder mandate while also ensuring long-term sustainability, fair pricing in the market for farmers’ milk and value creation in the dairy sector.
“This will set the right foundations for the overall long-term success of our dairy sector, the prosperity of our rural communities, and help strengthen New Zealand’s economic security at a time of global uncertainty,” he said.
Fonterra said its new flexible shareholding capital structure will be implemented in late March next year, subject to the board being satisfied that the relevant preparations are completed before then.
Chair Peter McBride said it will support Fonterra’s strategy by helping to maintain a sustainable milk supply, protect farmer ownership and control, and support a stable balance sheet.
“Our co-operative is already making good progress towards our 2030 strategic goals, and we believe moving to our flexible shareholding structure will help ensure that we stay on track,” McBride said.
He said the company believes March is the best date for implementation because it avoids its share trading black-out period associated with the co-op’s interim results.
“It also gives shareholders time to fully digest the detailed information we will be sending through ahead of the implementation date and to seek advice from their financial advisors.
“We are mindful that it’s a busy time on the farm, and that advisors may not be available over the summer holidays.”
