Tuesday, March 19, 2024

Little farmer reaction to LIC plan

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Owners of LIC’s co-operative shares are being urged to read the information on the directors’ plans for a share restructure to see what the impact on them will be.
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The call from Southland Federated Farmers president Allan Baird applies especially to dairy farmers who own only the co-op shares and not the NZAX-listed investment shares.

“I still have genuine concerns whether the plan is fair to those shareholders over their voting power in the co-operative and there’s a short-term risk for those who might leave dairying in the next five years or so over the value of the new shares when they are redeemed because of the market pricing.”

Any restructuring has to recognise the value of the co-operative shareholders as they are the owners.

LIC is holding a special meeting in Hamilton on Wednesday for shareholders to vote on the plan to disband the existing co-op and investment shares and replace them with new ordinary shares listed on NZAX. Shareholders can also vote online.

LIC has held several meetings round the country to discuss the plan but indications are that farmer turnout has been low.

There was a “reasonably low attendance’’ at the meeting in Winton in Southland that Baird went to.

He also thought there was a low level of understanding about what was involved.

“What I gathered was that there is either a lack of awareness about LIC’s plans or shareholders are happy with what the directors are doing and are happy to leave it to them.

“I’m a little concerned that there’s still some farmer apathy.”

An independent report commissioned by LIC described the share restructure process as complicated and said there would be a significant transfer of voting power from co-op shareholders to investment holders.

Overall, the report writer, Northington Partners, concluded the benefits of the proposal outweigh the potential negative impacts.

LIC directors say the existing set-up, which has the dairy genetics group’s farmer-customers having to own co-op shares but then having the choice on whether to own investment shares, contains potential conflicts between the two groups.

The co-op shareholders have the voting power but not the full economic interest in the business while the investment shareholders do not have any voting power but have the greater economic interest in dividends and future growth.

Over time that could cause issues for the ongoing management and governance of LIC, the directors say.

Chairman Murray King said there is no plan B for the co-operative if the plan is voted down by shareholders.

“I want to address one piece of feedback that we have been hearing from some farmers, that this proposal is simply our first go and that a no vote will result in us going away, tweaking what is on offer and coming back for a second vote on a revised deal that is somehow more favourable.

“This is completely wrong.”

The board had spent two years considering the issues and it was clear this proposal is the “fairest, balanced and most transparent way of resolving them”.

If the plan is voted down directors will put their focus “on making the best out of carrying on with the existing share structure”.

For the share scheme to proceed it must be supported by at least 75% of the votes cast separately by both co-op shareholders and investment shareholders.

Most of the 10,200 LIC co-op shareholders own fewer than 2000 shares and 36% of those shareholders do not own any investment shares.

Baird, who owns co-op shares but not investment shares, said his concern is that many of those farmers will not engage in the process and thus not vote. Voter turnout in the past for LIC has been light.

“Those with investment shares have a foot in both camps and are more likely to gain from the change, so are more likely to vote.”

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