Big guns back TAF

"Directors are unanimous in backing TAF, and 94% of the Shareholders' Council members have given it their full support," he says.

"This month, several former industry leaders have voiced their support. In addition, Professor Michael Cook, an international expert on cooperatives, has commented that by removing redemption risk and creating a permanent capital base, TAF will allow Fonterra to operate much more like a conventional co-operative," says van der Heyden.

Among those who have said farmers need to support TAF are: former Dairy Board CEO Murray Gough; former Dairy Board chairmen Sir Dryden Spring and John Storey; foundation Fonterra CEO Craig Norgate; former Fonterra CEO Andrew Ferrier; and former Shareholders Council chairman, Blue Reid.

"At the 51 farmer meetings held around the country this month, a record turnout of 3560 farmer shareholders showed what the co-op spirit is all about.

"Throughout the evolution of our capital structure, they have made their views clear and we have listened," says van der Heyden.

At the meetings, questions and discussion centred on several key concerns: preservation of 100% farmer control and ownership; integrity of the Farmgate Milk Price; redemption risk and government intervention, he says.

"Redemption risk is a serious threat to Fonterra. There are plenty of scenarios in a volatile world economy where a run on the co-op's capital can happen, and we have to always allow for that. It holds the co-op back – and we need to deal with it.

"A vote against TAF would mean the co-op remained exposed to redemption risk. We would have to go back to the drawing board on our business strategy refresh, and start again on options to fix our capital structure.

"We can't just forget about it. Instead, we will have to launch a new round of consultation with shareholders and the Government to find another way to deal with redemption risk.

"The co-op will be held back, shareholder returns could be impacted, and the only people to gain a benefit will be our global competitors.

"We have listened to shareholders' concerns on 100% farmer control and ownership and are confident it is fully protected. The board, council and independent experts have examined this co-op principle from every angle, and all are satisfied. The bottom line is that only farmer shareholders can vote – and any change to our constitution requires a 75% vote.

"If something completely unexpected emerges after TAF's launch, we can pull the plug.

"The other key principle is the integrity of the Farmgate Milk Price. We have assured shareholders it cannot be manipulated. The Milk Price Manual is set in concrete, and is a public document – it's completely transparent.

"Our Milk Price has been challenged a number of times in the last year, driven by our competitors and consumers. It has stood up to scrutiny every time," says van der Heyden.

"There have been misconceptions too about the Fonterra Shareholders' Fund, particularly about the money paid by investors to purchase units. This capital goes into farmers' pockets – not to Fonterra. TAF is not about raising capital for the co-op.

"Mistrust of political influence or intrusion means some fear that the current or a future government will intervene in our business. That has long been a fact of life – but has nothing to do with TAF.

"In fact, the risks of Government involvement could indeed be worse without TAF. The Government has said it will insist on movement to a fair value share price by the end of 2013, if TAF does not go ahead. At today's valuation, that's a change that would see the share price much closer to $5.57 than $4.52, and make sharing up more costly for farmers."

Van der Heyden says TAF will enable Fonterra to remain an internationally successful business, and will also be good for farmers.

"TAF will be good for the co-op – and for farmer shareholders. It will provide more options for managing farming business cash flows, more choices for retiring farmers, and a pathway for sharemilkers seeking to become shareholders.

"A lot of time and effort has been spent on getting this right. We've also had the benefit of listening to many skilled and expert advisors reporting to the co-op, the Shareholders' Council and the Board in terms of designing the best possible system for Trading Among Farmers.

"I have complete faith in the process we have been through.

"Now, it is up to shareholders to deliver a clear mandate in favour of Trading Among Farmers," says van der Heyden.