Published 11 December 2007
Dairy Equity Ltd’s board will investigate options to sell all or part of the business, or realise its assets and return the proceeds to shareholders.
Shareholders voted in favour of the directors’ resolution to cancel the 50c call and investigate the steps necessary to realise its investments at the annual meeting today.
Dairy Equities chairman Peter Jensen said the company had been profitable since its inception and the sale process should realise close to shareholders’ original investment.The company was listed in September, quickly achieving its $92 million target subscription. “However,” Mr Jensen said, “the second part of the equation, that of converting our subscribed cash into the beneficial rights to Fonterra fair value shares, proved much more difficult. “Farmers are traditionally rather conservative, this was a totally new product & concept and, in the first instance, it was not enthusiastically received or supported (mostly due to lack of understanding of the opportunity) by those the farmers turned to for advice – that is, their lawyers, accountants, farm consultants, neighbours & the dairy co-operative. The market circumstances in terms of the VAC component of milk and the commodity milk price outlook also conspired against our being successful.“The result was a very small uptake of the offer, in spite of a major promotion by the manager to the extent that, by the time we ceased purchasing fair value shares in early August, only $21 million had been spent on fair value shares.”
Mr Jensen said 2 subsequent Fonterra announcements had serious impacts – it said it was to undertake a major review of its capital structure, announced a dramatically higher milk price for the 2007-08 season and, at the same time, forecast a much reduced VAC (dividend) from 59c/share to 20c/share.
Attribution: Company statement, story written by Bob Dey for this website.