Two Major NZ Dairy Deals Completed
Two major acquisitions in the New Zealand dairy sector were completed this week.
South Canterbury dairy farmer Leonie Guiney is one of several shareholders who, after seeking expert legal advice, says the current proposal will see farmer control undermined.
Fonterra’s Sky TV broadcast on Friday (December 16) “had no update in it” and while “it’s positive Fonterra has acknowledged farmers have an issue with the shareholders fund structure,” Guiney says that acknowledgement has only come as a result of grassroots shareholders exposing the threat TAF presents.
“What we’ve discovered is that the locked box is in fact an empty box. The asset was sitting on the trust balance sheet in the proposal all along, completely compromising the commitment of 100% farmer ownership and control.”
For nearly two years, Fonterra’s board and management have been saying the TAF proposal will retain 100% farmer owner and control, but with the asset corresponding to shares showing on the unit trust’s balance sheet, unit holders, ie outside investors, would have legal rights under company and trust law to expect trust managers to act in their best interests. In effect that would be to maximise dividend, and minimise milk price, explains Guiney.
“Now we have been told they [Fonterra management] have three more options, the detail of which they are working on, and one of them is leaving the current proposal as is!
“How can Sir Henry keep repeating ad nauseam the line about 100% ownership and control and leave the current proposal on the table?”
Assurances shareholders ‘will be informed in due time’ from Fonterra’s board also ring hollow, she says.
“How many times have we heard this? How much closer is this to being pushed through parliament?
“But the biggest question of all is this – at what point did our cooperative’s purpose shift from looking after the interests of its co-op members and owners to looking after the interests of future investors in the NZX , including the NZ Govt?
“How do we halt this no longer subtle move towards demutualisation of our cooperative? How do we as the producers of the milk protect future generations of milk producers against the short-term gain mentality of those who would prefer to trade?”
Guiney is also concerned at how the issue is being reported in certain media outlets, given NZX would be likely to benefit from a demutualisation of Fonterra.
“Remember, NZX now owns both NZ Dairy Exporter and Farmers Weekly.”
Suggestions in the latter, December 19, that 4% dry shares in Fonterra as of July 2011 ‘is one measure of farmers’ appetite to expose themselves to non production linked share ownership and dividend income’ also grate.
“To me 4% looks like a very poor appetite and is in reality just a reflection of the expected fluctuation in milk production due to normal climatic variation, possibly plus a little headroom on farms that anticipate expanding output...
“We have no appetite for ‘non production linked share ownership’ and see it as the biggest risk to the future of our milk price and cooperative.”
A Fonterra spokesman re-iterated to Rural News that the Board, Shareholders’ Council and Management remain totally committed to 100% farmer ownership and control, and they are in regular contact with shareholders about TAF and getting their feedback.
“This will continue into the New Year and we have advised our farmers that there will be a round of farmer meetings from Jan 31 – Feb 3.”
