CAPITAL STRUCTURE CONSULTATION 2021
HOWWE WENT ABOUT OUR CAPITAL STRUCTURE REVIEW We were clear from the beginning about our objective: to have a capital structure
of design principles. We shared these with you after our annual results in September 2020. The wide range of alternatives that we looked at were assessed and prioritised based on how well they met the objective and design principles outlined below.
that ensures our Co-op’s financial sustainability so we can deliver value for this generation and the next. We started by identifying what the key elements of a financially sustainable Co-operative are and developing a set
Design principles
Does the structure preserve farmer ownership and control of the Co-operative for the long term? Does the structure support our ability to attract and retain high quality, sustainable milk and provide financial flexibility for farmers? Does the structure protect value for current Co-operative members and allow farmers to transact their membership / shareholding in a way that is fair?
Ownership & Control
Sustainable Milk Supply
Protect Value
Does the structure align incentives between shareholders, unitholders and management, to maximise value?
Align Incentives
Does the structure manage redemption risk and economic shocks in a way that makes the Co-operative resilient? Is the transition to a potential new structure affordable, achievable and fair to unitholders and farmer shareholders? Does the structure preserve balance sheet strength and provide access to capital at a reasonable cost in the future? Is the structure simple to understand and simple to operate for both farmers and the Co-operative?
Build Resilience
Transition Effectively
Access Capital
Simple
We listened to farmer views. It was clear from the outset that consultation for this review would be more challenging than last time because both shares and units in the Fund are traded securities and we are legally required to comply with financial market continuous disclosure rules.
While we would have liked to have been out on the road discussing options with you earlier, we have gained useful insights from farmer workshops on capital flexibility that were held in 2019, the roadshows after annual results and interim results, a phone survey we did in December 2020 of a representative
sample of 350 farmer owners, as well as the online survey available to all farmers from January to February 2021 where we had around 1,800 responses. Your feedback has very much helped to shape the direction of the review so far.
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