Farmers back Co-op with $61 million of new share purchases

Fonterra’s farmer-shareholders have applied for $61 million of additional Fonterra shares, lifting the total number of ‘dry’ shares to 6% of shares on issue – further strengthening the Co-operative’s balance sheet.

Farmers had applied for 13.5 million shares, worth a total of $61 million (at the current share price of $4.52), at last night’s 5pm deadline for buying additional shares for 2010/11. These additional shares are above those farmers are required to hold to back their recent or expected milk production.

Chairman Sir Henry van der Heyden said the uptake of dry shares was a vote of confidence in Fonterra’s performance and would further strengthen the Co-op’s financial position.

“That’s $61 million of new equity that the Co-op wouldn’t otherwise have had,” Sir Henry said.

Capital structure changes approved by farmer-shareholders in 2009 allowed farmers to hold shares in the Co-operative up to 120% of their milk production. Further changes underway, as part of Trading Among Farmers, will allow farmers to hold shares up to 200% of their annual milk production.

“We have been evolving our capital structure so our farmers have a greater incentive to invest in Fonterra and hold additional shares. This is good for the health of the Co-op and it also gives us as farmers more flexibility so we can buy and sell shares when it best suits our farm cash flows.”

Sir Henry said more than 70% or 7,500 of Fonterra’s farmer-shareholders were now holding dry shares, representing about 6% of the total shares on issue.

“It’s great to see our farmers are backing Fonterra and its future performance,” he said.

Earlier this month Fonterra announced an extension to the closing date for the purchase for shares from 21 September to 30 September 2010.

Sir Henry said: “This gave farmers some extra time and meant they could consider the Fonterra’s financial 2009/10 results in making any decisions to buy extra shares”.

Fonterra farmers are able to buy shares during a defined period each year, which opened on 1 June 2010.