7 Apr 2010

Fonterra plan allows public to invest in fund

10:14 pm on 7 April 2010

The public will be able to invest in a Fonterra-linked fund under the dairy co-operative's final restructuring proposal. It believes the plan will also enable it to head off competition from foreigners buying up New Zealand farms.

The New Zealand co-operative on Wednesday released details of the proposal that would allow farmers to sell shares to other dairy farmers if they want to leave the co-operative or reduce their milk supply, rather than having to go through Fonterra.

At present, farmers are paid a set price at the end of each season by Fonterra if they want to reduce milk supply. This process, called redemption, means Fonterra has millions of dollars washing in and out.

Under the proposal, farmers would have up to three years to buy or sell shares and could buy up to double what they can now.

Fonterra's plan also proposes a new fund that would buy the right to receive future dividends and share price gains from these farmers.

The fund would raise finance by selling units to the public and boost the market for farmers' shares. The units will not have the voting rights of shares held by farmers supplying Fonterra.

Fonterra believes the restructuring plan will help make it stronger in the face of the growing threat of competition from foreign investors.

Chairman Sir Henry van der Heyden says global food security fears mean more foreign interests are keen to invest in New Zealand.

"If they get a very strong foothold in New Zealand and get a large amount of our milk supply here ... we don't believe that would be ultimately the right thing for our farmers and we don't think that would be actually sustainable."

At least 75% of shareholders will need to approve the plan before it is implemented. Shareholders will vote later this year and Fonterra says it is confident it will get the support it needs.