Fonterra hits pause on equity scheme

  • 28/07/2015
(Getty)
(Getty)

Fonterra has put on hold plans that would have given its 10,500 farmer suppliers access to investor capital to help them with the compulsory purchase of Fonterra shares when they increase milk production.

Fonterra farmers have to hold one Fonterra share for every kilogram of milk-solids supplied each season, in good seasons and bad, and there have been concerns growing milk production would mean some suppliers will have to borrow to meet their obligations.

Chief financial officer Lukas Paravicini said the decision to shelve the equity partnership trust proposal was a consequence of investment banking company UBS deciding to end the advisory role it began late last year, for reasons unrelated to the trust itself, as well as volatility in dairy and equity markets.

"These two factors mean that it is appropriate to hit the pause button," he said.

"We will take the time needed to review the structure of the proposed trust and its implementation as market conditions unfold."

Given the current dire prospects for a second season of low dairy payouts, there's likely to be a number of farmers looking for more equity to assist with the requirement to "share up", said Federated Farmers dairy chairman Andrew Hoggard.

The proposed trust would have allowed farmers to partner with global investors, who would take a minority stake in their dairy farms.

NZN

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