CAPITAL STRUCTURE CONSULTATION 2021
WHY THIS IS THE PREFERRED OPTION
We prefer the Reduced Share Standard structure over the other options outlined in Section 5 for several reasons. » Overall, we think this structure measures well against the design principles for the review while remaining aligned with our Co-operative Principles. It supports a strong Co-operative and sustainable milk supply but still requires all suppliers to become farmer owners with “skin in the game”, and all farmer owners have exposure to both milk price and some earnings. » It is preferable to a Dual Share structure (outlined in Section 5) at maintaining a strong balance sheet for our Co-op. This is a high priority for us and was also reflected in farmer feedback. This is because retaining a single share would mean that all share capital is rated as equity (which would not be the case under a Dual Share structure where one of the shares may be partially classified as debt by ratings agencies). » We think it would be more straight forward to implement than other options. We have also reached a preliminary view that having No Fund would be preferable to a Capped Fund because it simplifies our Co-op. However, if we cannot reach an acceptable arrangement to buy back the Fund that 75% of voting unit holders support, then a Capped Fund would also work. In other words, we would only seek to remove the Fund at a reasonable price that was acceptable to unit holders, fair to farmer owners and made sense to the Co-op compared to the Capped Fund alternative.
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