Fonterra says it will start talking with its farmer shareholders next week on the next stage of its proposed capital restructuring, which would allow farmers to trade co-op shares among themselves.
"The Fonterra Board and Shareholders' Council have voted to support the concept of Trading Among Farmers and agreed thatit should go out for consultation," says a press release just issued.
Feedback from this process will be taken into account before any final plan is put to a farmer vote. Any proposal would require 75 per cent support of farmer shareholders voting.
The new scheme would allow farmers to buy or sell their Fonterra shares among themselves, instead of purchasing or redeeming them through the co-op. The co-op will remain 100 per cent farmer owned and controlled.
An earlier attempt to allow minority shareholdings from non-farmers was rejected before even being put to a vote. This time the co-op is moving slowly, ensuring farmer support before any change is proposed.
Allowing share trading is part of the dairy giant's plan to reduce what it calls "redemption risk" - where millions of dollars of capital 'washed in and out' of the co-op depending on milk production levels.
It also says loyal Fonterra shareholders were penalised by effectively funding the return of share capital to farmers who choose to leave.
Of particular interest to farmers will be what kind of restrictions on share ownership will be introduced - such as a maximum shareholding amount to stop control ending up in the hands of only a few members.
The first stages of the capital structure change received almost 90 per cent support from farmer shareholders voting in November last year.
Step one allowed farmers to increase the number of shares they could own, up to 120 per cent of their current or expected milk production.
As an incentive for farmers to hold a buffer of "dry" shares in excess of production, Fonterra pays a milk price and also distributes profits (after retentions) as a dividend based on shares held, rather than milksolids produced.
Invitations were mailed today to Fonterra's 10,500 farmer shareholders for a special television broadcast at 1pm on April 7.
A series of farmer meetings to discuss the 'suggested approach' would then be held around the country the following week.
