Jamie Mackay: Farmer shareholders vote in favour of Fonterra's planned revamp of capital structure

By RNZFonterra farmer shareholders have voted overwhelmingly in support of a plan to revamp the co-operative's capital structure.It is one of the biggest votes in the co-operative's history.The structure had been proposed because the co-operative is concerned that as milk production falls, more farmers will look to sell their surplus shares to non-farmers in its associated shareholders fund.The new structure put to the vote makes it cheaper to join the company, and preserves farmer ownership by reducing the number of shares they need to hold.At least 75 per cent of the 10,000 farmer shareholders had to approve the proposal, and just over 85 per cent have done so.Now Fonterra needs the Government to amend the Dairy Industry Restructuring Act (DIRA) so the changes can be implemented.Chairman Peter McBride said the board and management were united in the belief that the flexible shareholding structure was the best course of action for the co-operative."Changing our capital structure is the most important decision we as farmers have made in almost a decade," he said in a statement."The results of this year's resolutions were all above 80 per cent, which shows farmers are united in their support for the direction of the co-op. Our full focus is now on delivering the strategic commitments we have made."I believe we are philosophically aligned with the Government and remain confident that we can find a regulatory framework that supports the Flexible Shareholding structure," McBride said.The co-operative is aiming to implement the changes as soon as possible from the beginning of next season.Share compliance obligations will remain on hold until at least six months after the new structure is effective.The current cap on the Fonterra Shareholders' Fund will remain in place as a cap.When Fonterra was formed in 2001, special legislation (DIRA) was passed to allow the country's two biggest co-operatives at the time, New Zealand Dairy Group and Kiwi Co-operative Dairies, along with marketing and export agent the New Zealand Dairy Board, to merge.In a letter to Fonterra's chair in November, Agriculture Minister Damien O'Connor expressed reservations about the proposal, saying he was not sure the proposal would deliver the best long-term outcomes for farmers or the dairy industry.He said he was particularly concerned that the current proposal risked creating diverging shareholders' interests between farmers with small shareholdings and those with larger ones."At this stage, it would be difficult for the Government to support an amendment to DIRA to facilitate the proposals," O'Connor said.RNZ, Staff ReporterSee omnystudio.com/listener for privacy information.