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Fonterra Suppliers Should Seek Advice

Fonterra Suppliers Should Seek Advice

30 August 2006

Farmers should seek reliable, independent financial advice before selling a beneficial interest in their shares to Dairy Equity Limited, says Dairy Farmers of New Zealand vice-chair Lachlan Mackenzie.

"Farmers need to carefully weigh up the pros and cons before entering into this arrangement with Dairy Equity," Mr McKenzie said.

Dairy Equity seeks to buy the financial benefits of Fonterra shares from farmer suppliers who may want to turn some or all their Fonterra shares into capital. Farmers who take up the offer will keep their voting and supply rights, but Dairy Equity will receive the value-added component of the farmer's annual milk payout and also any increased value of shares.

Mr McKenzie said the media had approached DFNZ - the dairy industry group of Federated Farmers of New Zealand - for its views on the Dairy Equity offer.

"One of the factors that farmers must weigh up is whether it might be better to borrow against their Fonterra shares," he said

"That said, some farmers might not want to go further into debt and so the Dairy Equity scheme might look more attractive.

"Farmers are astute investors. If they need to raise capital, Dairy Equity is one way they could do it, but it's not the only way. I would hope that farmers have a bit of a look around, take good quality independent advice, and see what their options are before making a decision," he said.

Mr McKenzie said farmers should be aware there were other ways to raise capital which should be explored alongside the Dairy Equity proposal.


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