Fonterra raises US$271 million from farmers

Fonterra's farmer shareholders have invested US$270.7 million buying shares in their co-operative following last year's changes to capital structure.

In a share application period that ended last week, farmer shareholders were given the opportunity to adjust their shareholding up or down, to anywhere between 100% and 120% of their current or expected production, at a price of US$4.52 per share.

Out of Fonterra's 10,500 farmer shareholders, 3,461 subscribed for a total of 60 million shares worth US$270.7 million both to cover anticipated increases in production for the current season and as additional or ''dry'' shares in excess of production, while 59 applied to surrender a total of 1.6 million shares worth US$7.3 million.

Under the capital structure changes, which received almost 90% support from farmers voting at November's annual meeting, farmers now have greater flexibility in the number of shares they own in proportion to their milk production - rather than adjusting their shareholding up and down each season strictly in line with milk production.

As an incentive for farmers to hold a buffer of dry shares in excess of production, all shares held on dividend record dates are now eligible for any dividend payments based on Fonterra's profitability.

Sir Henry said it was important to remember the capital structure changes were not just intended to raise additional capital from dry shares, but also sought to reduce the risk of capital leaving the co-operative through share redemptions when milk production fell.

''As drought is lowering milk production in some regions, a significant number of our farmers may end the season with dry shares in excess of their production. They will now have an incentive to hold onto these shares as they will be eligible for dividends paid on all of the shares they hold.''