20 May 2002
PR62/02 Federated Farmers: Wool Growers Encouraged to Vote in Wool Board Referendum
NZ Meat & Fibre Producers Chairman Murray Taggart is urging all woolgrowers to participate in the Wool Board referendum.
"It is essential that wool growers have their say in the referendum. We need to send a clear signal to the Government
that farmers want the Wool Board reformed," said Mr Taggart.
"Voting closes on 22 May 2002 at 2.00pm. Growers who have received their voting papers should send them off as soon as
possible. If growers haven't received their voting papers and information pack they need to call the Wool Board on 0800
104 666 urgently to register."
The referendum asks three questions:
1. Should the Wool Board be wound up?
2. Do you agree that the basis for appointing the Board's assets among qualifying wool growers should be the number
of sheep farmed?
3. Which of the following options do you prefer for the shares in these companies:
(a) Share ownership confined to wool growers for the first two years, with the maximum proportion of the company any
single grower could own being restricted to 5 percent?
OR
(b) Full tradeability of shares on the open market from the outset?
Mr Taggart hopes most growers will find they can answer "yes" to the first two questions in the referendum seeking
approval to wind up the Wool Board and the basis of share allocation. However, the best response to question 3 on
restricting tradeability of Wool Equities Ltd shares may not be so apparent.
Wool Equities Ltd will be a commercial investment company and not a co-operative. It will not purchase wool from
growers. Returns to shareholders will come from capital growth and/ or dividends paid.
Growers have been asking what are the implications of restrictions on who can own Wool Equities Ltd shares?
Mr Taggart says "Companies that place restrictions on share ownership often see their shares trade at a discount to the
true market value. The greater the restriction, the greater the discount. Restricting ownership of Wool Equities Ltd
shares will result in a lower share price than would otherwise prevail. Growers are more likely to sell their shares as
the perceived capital growth will be less than they expected."
"Restrictions also come with the risk that management and directors become complacent in the belief they are immune from
takeover. In reality restrictions will not prevent takeover. Instead they are likely to make the company more vulnerable
to takeover as a buyer is more likely to be able to buy the shares at a discount to their true value."
It goes without saying that the requirement that shareholders must be a woolgrower is easily achieved by any potential
bidder - they only have to buy a sheep! The proposed 5% cap on share ownership is also easily by-passed - effective
control could probably be achieved with 30% of the shares, meaning the buyer would only need to fund 5 business
associates to combine with his/her own holding to achieve 30% ownership.
"Restricting ownership is a flawed concept that detracts from shareholder wealth and offers little other than emotional
value."
"The best way of ensuring growers retain their investment in Wool Equities Ltd is to maximise the share price via
unrestricted tradeable shares," concluded Mr Taggart.
ENDS
For more information: Murray Taggart (025) 249-9494 Maxine Yule (04) 473-7269