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Fonterra Chairman Wants "Clear Air"

Fuseworks Media
Fuseworks Media

Wellington, July 24 NZPA - Fonterra chairman Henry van der Heyden says he wants "as much clear air as possible" when Fonterra comes out with its next bid to re-jig the cooperative's capital structure.

Mr van der Heyden today announced he was stepping down from the board of NZX, which operates the local sharemarket.

NZX chairman Andrew Harmos said in a statement Mr van der Heyden's decision to step down was to remove any perceptions of potential conflict of interest.

Mr van der Heyden had contributed significantly to NZX, including bringing a greater international focus that leveraged off his experience with Fonterra. He had also helped NZX deepen its understanding of the rural sector.

Mr van der Heyden said he wanted Fonterra's 10,000 farmer-shareholders to focus on "the real issues" rather than some of the perceptions which had been raised in the past.

"Clean air" would remove some of the "political issues" which had been raised over Fonterra's original effort.

Fonterra's initial bid two years ago to change its capital structure blew up in its face when farmers protested their directors' preferred option of a "bold and brave" float of the shares of an operational subsidiary.

The board was last year forced to concede that it would have been rolled in a planned May vote on splitting the company into a milk-supply co-operative and a wholly owned corporate holding all the assets and operations.

When the float was first proposed, many market observers were buoyed by the idea that the co-operative's nearly 1.28 billion shares -- then estimated to be worth $6.79 each -- meant an operating arm could have had a market capitalisation of $8.7 billion, compared with the then $7.1 billion market cap of the largest company listed on the NZX, Telecom.

But farmer worries about a potential loss of control to city-based investors were not helped by a claim by a former Fonterra director, Harry Bayliss, during director elections late last year -- in a mass email to Fonterra's shareholders that it appeared the proposed (capital restructure) scheme was simply `parked' and was still the preferred option.

"I am in no doubt that this priority is being driven by the chairman (Mr van der Heyden)," Mr Bayliss said at the time.

In the wake of the election, the Fonterra board went back to the drawing board, and this time is getting the farmers' watchdog, the Shareholders Council on board before it makes any announcements.

Meanwhile, without the capital restructure that would have provided for Fonterra to expand its business internationally, the cooperative has scaled back ambitions to focus on quality and efficiency, producing "low cost, high quality milk".

Today, Mr van der Heyden said there was no timeframe for a new announcement, but he had decided, at his own initiative to remove any room for misunderstandings over his membership of the NZX board since September 2005.

"It's never been talked about round the Fonterra board or the NZX board," he said. "But this decision is in the interests of Fonterra".

Before again consulting farmers, the board would have alignment with the Shareholders' Council, would have a complete plan to show farmers, and it would take the process in small steps.

"I want to ensure that these deliberations are untainted whatsoever by any concerns about the NZX directorship -- no matter how misplaced such concerns might be".

Mr van der Heyden said he hadn't thought about potential impacts of farmer satisfaction with the eventual process when his seat on the Fonterra board comes up for election late next year.

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