It has been really encouraging the widespread support we have had, from around the country, for our attempt to give some balance to the discussion around the Fonterra Board's Preferred Option. I have had contact from and spoken to a large number of people around the country and have yet to find anyone with a well thought through view that supports the Board's direction.
I had the opportunity late last week to meet with the Board of the Irish Farmers Journal, the most highly respected Ag Newspaper in Ireland. Mike Murphy, a well known Irish Dairy farmer was also with the group. I wanted to gain a more up to date insight into the Irish Dairy Industry and in particular get their view as to appropriateness of comparing Fonterra's current situation and the Board's Preferred Option with the Kerry Foods case.
While they were reluctant to make any comment on the wisdom of the Preferred Option, they were of a view that there some major differences between the two.
1. In the period leading up to the Kerry float, Kerry farmers were constrained by quota at the farm level and therefore Kerry Foods was also constrained in its ability to grow its business in volume and value terms.
2. They had a very able group of young executives lead by Denis Brosnan, who has been shown by history as having exceptional ability.
3. Some of the early acquisitions, lead the company away from being just a Dairy Company, into meat, flavours and other food groups. Dairy now comprises only 8% of Kerry Foods' business.
4. There was no ability of Kerry farmers to fund the acquisitions.
So I think we can see that it would be very unwise to take the Kerry case as any sort of assurance that Fonterra would have a similar outcome.
I have had feedback from a large number of people for which I really grateful. Just this morning I had the following from Colin Holmes. Very simply put but posing a fundamental question.
Dear Harry, It seems to me that, in the end , the basic problem will be the need for mutual coexistence and collaboration of the two groups of shareholders , with completely opposing objectives [ one group benefits from a high milk payout , which may well be at the expense of a high return to the investments of the other group]. In addition, the first group is completely committed to dairying [ it is their living and their life , the house the farm, cows, workers etc ], while the other group is virtually uncommitted , because they can withdraw their funds at any time , with minimal effect on their own life. Are there any examples of two groups of shareholders, with such opposing objectives and motivations, working together successfully in an international company over a long period of years ? It would be interesting to see if any can be found. If not , that could tell us something? All the best Colin |
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I think we have made a very good start but there remains much to be done.
Thanks again for your support.
Regards,
Harry Bayliss.