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Fonterra Plan Worse Than Expected


15 November 2007

Fonterra Plan Worse Than Expected

The preferred capital restructure option released by Fonterra today is even worse for farmers and the New Zealand economy than was expected, says New Zealand First primary production spokesperson Doug Woolerton.

“If implemented, today’s proposal will be a disaster for farmers and for our economy as a whole,” said Mr Woolerton.

“Under the proposal, 49.9% of the company could eventually be owned by non – New Zealanders. This would mean that 49.9% of Fonterra’s profit could end up lining the pockets of foreign investors. Given the significant impact of dairying revenue on our economy, it is hard to see how this proposal can benefit our country in the long run.

“What makes today’s proposal even harder to swallow is that that the claims underlying the proposal are rubbish. Capital restructuring and a partial float is not necessary to fund future expansion as is claimed by Fonterra’s chairman. Fonterra has a credit rating almost as good as the New Zealand Government and could very easily secure loans for the $2.5 billion they seek under this proposal.

“Farmers need to think very carefully about what they are being offered. If the proposal is accepted, they will go from having a full collective share in a company built up over several generations to holding just a 65% stake overnight.

“They also need to consider the impact non-farming shareholders will have on their operations. History shows that publicly listed companies are beholden solely to increase returns to shareholders. It is likely the wishes of farmers will be drowned out as their control of the company decreases over time.

“Despite needing a 75% vote in favour of proceeding, proponents of this deal will be strongly urging middle aged farmers who are nearing the end of their careers to ‘take the money and run’.

“The one positive outcome from today’s announcement is that farmers have the power to put an end to this plan, and I strongly urge them to do so,” said Mr Woolerton.

ENDS

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