Fonterra’s share buyback programme

Fonterra Co-operative Group Limited says it will allocate up to NZ$50 million (€30.1m) to an on-market share buyback programme commencing 30 June 2022. Chairman Peter McBride says that in making this decision, Fonterra has looked at prevailing prices in the Fonterra Shareholders Market (FSM) alongside the co-op’s strategy and overall business performance.

“The co-op considers the prevailing price particularly since late April has undervalued Fonterra shares, which is a key reason for announcing this buyback,” says McBride. The buyback programme will be made under section 65 of the Companies Act and may run for up to 12 months from commencement.  Fonterra may acquire shares through the FSM at the prevailing market price from time to time in that period.

This programme is separate to the allocation of up to $300 million Fonterra announced last year to support liquidity in the FSM as farmer shareholders transition to the Flexible Shareholding capital structure, through an on-market buyback (Transitional Buyback) and other tools such as the market-making arrangements.

McBride notes that Fonterra is preparing to implement the Flexible Shareholding structure as soon as possible but has not yet set a date for when it will be effective. In April, the government announced its support for the structure and has signalled that it expects the amendments to progress through Parliament this year.

“We remind shareholders that even though share compliance obligations remain on hold until at least six months after the new structure is effective, shareholders can still buy or sell shares within Fonterra’s current constitutional limits (which is generally 1x-2x a supplying shareholders’ three-season average milk supply). Shareholders should seek advice from their financial advisor, accountant, lawyer, or rural professional before making any decisions,” says McBride.

The maximum number of shares that may be acquired pursuant to this buyback programme and the Transitional Buyback (should that also proceed under section 65 of the Companies Act) taken together over the next 12 months is 80,667,893 shares. This number of shares is set in accordance with section 65 of the Companies Act and represents 5% of Fonterra’s shares on issue 12 months prior to the acquisition of shares.

The number of shares purchased under the buyback from time to time, and the average price, will be notified to the NZX and ASX on the business day following the date on which those shares are bought back. Shares bought back will be cancelled upon acquisition, so the number of shares on issue will reduce accordingly.

Throughout the buyback period, Fonterra will continue to assess market conditions, its prevailing share price, available investment opportunities and all other relevant considerations. Fonterra reserves the right to suspend without notice or terminate the buyback programme at any time.

Meanwhile, other local competitors and New Zealand media are querying the reasoning behind this buyback and the government’s for allowing the restructuring, according to New Zealand website Stuff.

 Please see this link for more explanation:

Related content

Leave a reply

Dairy Industries International