Fonterra Shareholders to Vote on 30 June
Voting papers for proposed changes to Fonterra’s constitution are being mailed to Fonterra shareholders today ahead of a Special Meeting on 30 June.
Shareholders will vote on a Special Resolution amending Fonterra’s constitution to enable the Board of Directors to take steps to develop the detail required for Trading Among Farmers. The changes to be voted on include pre-conditions that would need to be met before Trading Among Farmers could be implemented.
Chairman Sir Henry van der Heyden said the changes to the constitution were designed to bring important benefits for both the Co-operative and its farmer shareholders.
“For our farmer shareholders, Trading Among Farmers would allow them to buy and sell shares when it suited their cash flows and would deliver flexibility when buying and selling shares with ‘three years in and out’ rules. Farmer shareholders would have the choice of freeing up some of their share capital through using the Fonterra Shareholders Fund,” Sir Henry said.
“For the Co-operative, Trading Among Farmers would stop money washing in and out of the balance sheet and this would provide Fonterra with more permanent capital that in turn would put it in a position to deliver the highest sustainable returns over time.
“The changes would be a further step in the evolution of the Co-operative. It is important that farmer shareholders take the time to read the material sent to them, and have their say.”
Sir Henry said the pre-conditions were designed to ensure that farmers have confidence that they would be able to buy and sell Fonterra shares when they wish at prices that reflect a well-informed and liquid market.
“In addition to the normal 75% shareholder vote required for any constitutional change, the pre-conditions mean that farmer shareholders can be assured the Board would not allow Trading Among Farmers to go ahead unless they consider that it would work for our farmers, and that this is supported by the Shareholders’ Council.”
Any changes to the framework and pre-conditions would require a further 75% vote, Sir Henry said. “If any changes were needed to the details, we would keep farmer shareholders fully informed.”
Sir Henry said feedback during shareholder consultations had been extremely valuable. “As a result of the feedback we have continued to develop the way that Trading Among Farmers could work.
“For Trading Among Farmers to work and meet the agreed objectives there would have to be enough volume of trading so that farmers can have confidence that they will be able to buy and sell shares when they wish to.
“Everyone understands that we need Registered Volume Providers (RVPs) for volume. However, they would be tightly managed and a 5% limit would apply to the number of shares that could be held by RVPs. These shares would be held in trust, not owned by the RVPs.”
Among other key thresholds, the number of Fonterra shares that could be subject to contracts with the Fonterra Shareholders Fund would be limited to 25% of total shares on issue, with a current Board target of 20%. The Board would set the cap on the number of an individual’s shares that could be subject to contracts with the Fund, which is likely to be set at 33%.
A 25% threshold would apply to the total number of dry shares not backed by milk production, with a current Board target of 20%. Individual shareholdings would be limited to up to 200% of milk production, and the number of dry shares that an individual could hold is limited to 5% of total wet and dry shares on issue.
These thresholds, together with the changes to the constitution and the pre-conditions, would ensure that Fonterra remains a farmer controlled and owned Co-operative, Sir Henry said.
“Voting stays with farmers and is based on milksolids backed by shares. And as now, the majority of directors and the chairman must be farmers elected by farmer shareholders and the Milk Price would be calculated under the Milk Price Manual.”
The main meeting on 30 June will be held at Palmerston North. It will be broadcast by live televised link to six other venues around the country in order to provide as many shareholders as possible with the opportunity to attend.
