It's devilishly complicated and will cost around $1 million to get $800 million into the hands of Fonterra shareholders.
The giant dairy co-operative is pressing ahead with plans to pay out some of the proceeds from the sale of its Soprole Chilean business last year.
Fonterra indicated in May of this year that it was bringing forward the timing of this payout to August 2023 from October 2023.
The plan is for the $800 million to be distributed to the group's shareholders, tax free, through a court-sanctioned scheme of arrangement, which will require a meeting of shareholders and a 75% vote in favour.
Fonterra received interim High Court orders for the proposal on June 12 and has now sent documents out to its shareholders for a special meeting on July 12. The intention then is for shareholders to receive an effective 50c per share on August 17 - although that's just an indicative date at this stage.
The scheme of arrangement will, according to Fonterra, involve:
- the repurchase and cancellation of one in every six shares held by each shareholder in Fonterra (together with all rights attaching to those shares) (Repurchase). Fractions of a share will be rounded up or down to the nearest whole number (with 0.5 rounded up);
- at the same time, one share held by each shareholder which is not repurchased by Fonterra will be subdivided into such number of ordinary shares as were repurchased from that shareholder, plus one. As a result, each shareholder will end up with the same total number of shares as they held before the Repurchase. This is to avoid creating share compliance issues for farmers or impacting shareholders' voting rights; and
- each shareholder receiving a cash sum of $3.00 for each share repurchased and cancelled (which is equivalent to 50 cents for each of the six shares).
The 20-page notice of meeting sent to Fonterra shareholders states that Fonterra has obtained a binding tax ruling from Inland Revenue that the amount paid to shareholders will be treated as a return of capital and not as a dividend for New Zealand income tax purposes.
Fonterra estimates that the implementation costs associated with the scheme (excluding the amount which will be returned to shareholders) will be $944,244.26 (plus GST).
It says these costs include external legal fees, anticipated share registry costs, regulators’ fees, preparation and postage of the Notice of Meeting Booklet materials and convening the Special Meeting of Shareholders.
Fonterra says the total capital return payment will be determined at the time of implementation of the scheme. As at June 13, 2023, Fonterra had 1,609,244,669 shares on issue. At $3.00 for one in every six shares, the total capital return would be $804,622,335.
2 Comments
Why not just put it in to working capital? Or dish it out as part of the milk payment? Have Fonterra no debt that could be paid off first? This smells of favouring the no milk producing shareholders, and shafting the vast majority of shareholders who produce milk.
You need to read up on the milk payment structure. Farmers who invested in shares at +$6/share would not be comfortable diluting their return through distribution into milk payments - sharemilkers have not invested in shares, so why should they financially benefit?
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