New capital structure by end of March 2023


Fonterra says its new capital structure is expected to be implemented at the end of March next year, provided the necessary preparations are completed.

This follows the passing of a law in parliament last night allowing changes to the co-op’s constitution.

The new capital structure aims to make it easier for new farmers to join the cooperative and to retain existing farmers, by allowing greater flexibility in the level of investment required.

Chairman Peter McBride said flexible shareholding would support Fonterra’s strategy by helping to maintain a sustainable milk supply, protecting farmer ownership and control and supporting a stable balance sheet.

“Our co-op is already making good progress towards our 2030 strategic goals, and we believe the move to our flexible shareholding structure will help us stay on track,” McBride says.

He says passing the relevant legislation in Parliament is giving farmer owners the clarity they’ve been looking for.

“This step gives us the confidence to implement the transition to our flexible shareholding structure.

“We would like to take this opportunity to thank Minister O’Connor (Minister of Agriculture Damien O’Connor) and the government for passing the bill on an urgent basis and giving the shareholders of the cooperative that certainty they so desperately need.

The decision to introduce flexible shareholding at the end of March was made based on a number of considerations.

“We believe the end of March is the best date for implementation, as it avoids our stock trading blackout period associated with the cooperative’s interim results,” says McbRIDE.

“The blackout period would impact our ability to support liquidity in the market via the transitional buyback, which is part of the liquidity package of up to $300 million that we previously announced.

“It also gives shareholders time to fully digest the detailed information we will be sending out ahead of the implementation date and to seek advice from their financial advisors. We recognize that this is a busy time on the farm and that advisors may not be available during summer vacation.

O’Connor says the changes approved by Parliament strike a balance between supporting Fonterra’s shareholder mandate and ensuring long-term sustainability, fair market pricing of farmers’ milk and the value creation in our 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 to bolster New Zealand’s economic security at a time of global uncertainty.

“Over the past two decades, new entrants have brought valuable innovation and healthy competition to the industry. These have led to the creation of new high value products, initiatives to enhance sustainability and job creation across New Zealand, and we want this important work to continue,” says O’Connor.

The main approved changes:

– improve the transparency and robustness of Fonterra’s commodity milk pricing arrangements by increasing the number of Ministerial nominees to the Fonterra Milk Pricing Panel from one to two.

– require that the chairman of Fonterra’s milk pricing panel be completely independent of Fonterra and appointed only with the approval of the Minister.

– empowering the Commerce Commission to issue binding directions to Fonterra on matters arising from its reviews of Fonterra’s milk pricing manual and calculation of the base milk price.

– support liquidity and transparency in the trading of Fonterra shares on its restricted market reserved for farmers, for example by requiring Fonterra to engage one or more designated market makers and to make available to farmers and unitholders a independent financial market analysis of its performance.

– support Fonterra’s ability to access internal capital to invest in innovation, by requiring Fonterra to maintain and publish a dividend and retention policy.


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