This year’s drought is thought to have sharpened Fonterra farmer-shareholders’ appetite for an offer to sell the economic rights to their shares, with around 20 per cent taking up the company’s supply offer.
New Zealand’s largest company has confirmed that its farmers offered to sell 75,223,742 economic rights of »wet» or milk supply-related shares in this month’s offer, totalling a value of nearly $600 million. The final purchase price for the offer was $7.92. It closed on Thursday.
Fonterra chairman John Wilson said given demand exceeded Fonterra’s maximum to be paid of $475 million, the offer would be scaled, with Fonterra buying 79.7 per cent of the economic rights each farmer shareholder offered to sell.
Wilson said some farmers indicated the money would relieve some of the cashflow pressure from the drought, while others intended to use the proceeds to further grow their farming businesses.
The success of the offer does not mean more units in Fonterra shares will be available for sharemarket investors.
The offer will not increase the current size of the NZX and ASX-listed Fonterra Shareholders Fund.
Fonterra has previously said it would purchase the units in the farmers’ shares that arose from the offer and would redeem them for Fonterra shares.
While farmers’ need for cashflow because of lost milk production is thought to have spurred the response to the offer, farmer watchdog the Fonterra Shareholder Council believes the takeup shows farmers are starting to use share Trading Among Farmers (TAF), the capital restructure last year which shepherded in the Fonterra Shareholders Fund, as it was intended.
Council chairman Ian Brown said the offer, the second supply offer since TAF was launched at the end of November, showed farmers are beginning to take advantage of the flexibility TAF offers them.
«The first supply offer saw farmers exercise some understandable caution but with growing confidence in the new system farmers are now ready to use TAF as it was intended. The solid level of demand from shareholders to release some of the economic value of their shares shows they are using TAF to their benefit,» Brown said.
«Farmers are taking advantage of the greater flexibility it offers them in making decisions that impact the day-to-day running of their business.
«This also strengthens our co-operative as Fonterra is now able to make better use of our capital rather than, as the recent drought would have compelled it to, distribute it as farmers redeemed their shares.»
Source: Stuff
