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Milking time - Source: ONE News -
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Business commentator Brian Gaynor says dairy co-operative Fonterra needs to get its capital restructure right this time around after failing to win farmer-shareholder support last year.
Fonterra's initial capital restructuring plans - dividing the co-operative into a supplier-owned co-op and a listed company - began in 2007 but fell over after failing to win the required shareholder support.
Fonterra is now looking to grow capital and possibly list on the stock exchange.
Neither Fonterra's board or farmers are revealing details but it is understood that the proposed capital restructure process will be carried out in up to four stages, and that farmers may cast their first vote at Fonterra's meeting in November.
Fonterra is not the only co-operative looking to change tack. Meat co-operative Silver Fern Farms went to its 20,000 farmer shareholders at the beginning of July in a bid to raise $80-$128 million to fund its strategic initiatives and strengthen its balance sheet.
The shares Silver Fern Farms issues to farmers will be converted into stock that can be traded on the exchange platform Unlisted.
Gaynor says the moves of both Fonterra and Silver Fern are a sign of the times, with co-operatives finding it much more difficult than they used to.
"They don't have a robust enough capital structure and it's much more difficult to get money from the bank, so they need to be able to raise equity capital and they can't do that under the co-operative structure," says Gaynor.
He says Fonterra has no choice but to get the capital restructure through this time and try and convince farmers that it is in their own interests.
"In other countries around the world agricultural co-operatives have been transformed into listed companies and it's been extraordinarily successful," he says.
He says farmers in New Zealand are reluctant to list as there is a fear that "Queen Street operators" will take over.
It is understood that Fonterra is consulting with farmers on the
capital plans.
