Fonterra to purchase $50 million of its own stock

Fonterra to purchase $50 million of its own stock

Fonterra to purchase $50 million of its own stock

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  • “It has also put aside up to $300 million to boost liquidity in the farmers-only sharemarket via a new repurchase scheme or other means.
  • Fonterra is in the process of a capital reorganization that has just gotten government.
  • The co-op’s hit a lifetime low of $2.20 per share last month and have more than halved in value over the previous year, decreasing the asset’s value on individual farmers’ balance sheets.
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Fonterra, the dairy cooperative, plans to buy back up to $50 million in its own shares because the price is too low.

“The co-op considers the prevailing price particularly since late April has undervalued Fonterra shares, which is a key reason for announcing this buy-back,” chair Peter McBride said in a letter to shareholders.

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He stated that the decision was made after careful consideration of Fonterra’s strategy and overall business performance.

“We also consider the merits of a buy-back alongside other investment opportunities we have in the pipeline. These have a range of risk and return profiles, but overall we believe there is room in our portfolio of investments for buying back shares at a price that we consider to be undervalued.”

It has also put aside up to $300 million to boost liquidity in the farmers-only sharemarket via a new repurchase scheme or other means.

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A share buyback reduces the quantity of shares on the market and, as a result, the value of those that remain.

Fonterra is in the process of a capital reorganization that has just gotten government support but requires a legislation change to become effective in order to make it simpler for farmers to join the co-operative.

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However, the government imposed conditions on its backing, including increased governmental supervision of milk price setting and outside control of trade in Fonterra’s shares and units.

The co-op’s hit a lifetime low of $2.20 per share last month and have more than halved in value over the previous year, decreasing the asset’s value on individual farmers’ balance sheets.

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