Fonterra wanted to raise cash with a stock-market float to fund expanding its dairying operations in other countries but in the long-run Fonterra would have paid out far more in dividends to (offshore) stockholders. The dairy farmers would end up working to line the pockets of foreigners and New Zealand’s current account would have suffered.
We already send nearly $4 billion a year offshore in dividends, mostly from companies like Auckland Airport, the Banks, Toll, Telecom, and Contact that were foolishly sold by governments in the 1980s and 1990s.
Good on the farmers for having the wisdom to keep their business kiwi-owned. (Now, work on that environmental impact)
Fonterra should fund its expansion plans by reducing the milk payout. That would reduce inflation and result in profits earned overseas returning to this country in the long-term.
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