Units in the Fonterra Shareholders’ Fund have been placed on a trading halt ahead of a key announcement regarding potential changes to the dairy cooperative’s capital structure.
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Fonterra chair Peter McBride

Fonterra said it plans to make an announcement prior to the market opening Thursday regarding a “comprehensive consultation process to seek feedback on potential options to change its capital structure”.

Following that announcement, the trading halt will remain in place until Friday “to provide time for FCG shareholders and FSF unit holders to review and consider the materials,” it said.

“Fonterra remains in a strong financial position and the consultation process will not affect the cooperative’s ability to operate.”

The fund was designed as a tool to manage the redemption risk it faced when farmers wanted to quit the cooperative and cash up their shares. The fund allows this to occur without derailing the cooperative’s capital plans.

In March, Fonterra chair Peter McBride released survey results on some high-level questions about what Fonterra’s capital structure should look like.

Topping the list of importance to farmer shareholders (not unitholders) was maintaining ownership and control of the cooperative with a whopping 82% of the 1,800 or so respondents expressing support for that position.

Investors in the Fonterra Shareholders’ Fund certainly haven’t had a smooth ride.

After the units were first sold at $5.50 in 2012, they climbed as high as $8.09 in March 2013 before the whey protein concentrate recall later that year took the wind out of Fonterra’s sails.

After pottering around between $5 and $6 for several years, they slumped to $3.15 in 2019.

They last traded at $4.60 as investors have more confidence in Fonterra’s current direction but they remain below the listing price.

Nominations are open for Fonterra’s board election but a repeat of the drama that rocked the vote three years ago can be ruled out.

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