5 October 2004
Fonterra Must Look At All Options
Fonterra Co-operative Group Ltd must carry out a detailed and robust study of all feasible options when reviewing its
capital structure, said Kevin Wooding, Chairman of Dairy Farmers of New Zealand (DFNZ).
"For dairy farmers to have confidence that Fonterra's review is the best it can possibly be, Fonterra must be diligent
and serious about looking at every possible option on the path to a better structure. Such a review will deliver the
best outcome for Fonterra's farmer suppliers, the dairy industry, and the national economy," Mr Wooding said.
DFNZ today released the first of four independent discussion papers about Fonterra's capital structure and in particular
the co-op's controversial fair value shares and much-criticised peak notes. DFNZ is the dairy industry group of
Federated Farmers of New Zealand (Inc).
"We carried out this research because DFNZ wants to give its members independent, reliable and up-to-date information
about Fonterra's capital structure. Our involvement will mean that we can help get the best possible outcome for the
co-operative and farmer shareholders," Mr Wooding said.
"It is crucial that farmers are fully informed about the current framework and the pros and cons of alternative
structures as the co-operative moves forward."
Mr Wooding said that Fonterra must put everything on the table during its review.
"Farmers are prepared to engage in meaningful dialogue on the issues, but will resist any attempt to foist unpalatable
options on them after a period of Clayton's consultation. There must be no hidden agenda in the review.
"I have had a number of meetings with Fonterra and so far I am comfortable that it is approaching the review with
integrity, and I look forward to it releasing a similarly detailed analysis of options for consideration by
The first of the four discussion papers is available at www.fedfarm.org.nz/fonterra Temaining three will be released
over the next seven weeks:
Paper one: The current structure (released today). Paper two: Strengths and weaknesses of the current structure
(released October 26). Paper three: Factors to consider in a good capital structure (released November 8). Paper four:
Potential options for a future capital structure (released November 22).
The staged release allows dairy farmers time to absorb the information in bites during a very busy period on their farm.
Mr Wooding said the papers were intended to inform and raise debate rather than say which option, if any, is best.
"DFNZ has not taken a position on a preferred option, or indeed if changes are the best option," Mr Wooding said.