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Commission releases draft determination on Fonterra Shares

The Commerce Commission today published its draft determination relating to setting the discount rate for calculating Fonterra Co-operative Group Limited's (Fonterra) annualised share value for the 2001-2002 season. This is a statutory requirement under the Dairy Industry Restructuring (Raw Milk) Regulations 2001.

In its draft determination, the Commission has used a different methodology to set the discount rate to that proposed by Fonterra.

Applying the Commission's methodology results in a preliminary discount rate for calculating Fonterra's annualised share value for the 2001-2002 season, of 11.7 percent. This compares with the discount rate proposed by Fonterra of 8.25 percent.

The Commission's draft determination, which includes reasons and a table comparing the different methodologies used by the Commission and Fonterra, is available on

<> (select Dairy Industry Restructuring Act, Commission Decisions).

The Raw Milk Regulations require the Commission to set a discount rate for calculating annualised share value in circumstances where Fonterra does not use a cost of capital rate in calculating the price of a co-operative share.

Fonterra advised the Commission in June 2002 that it did not use a cost of capital rate for the 2001-2002 season. The share price for that period was $3.00 per share and was agreed as part of the Merger Proposal for the merger of New Zealand Co-operative Dairy Company Limited and Kiwi Co-operative Dairies Limited.

The Commission invites submissions from any parties who consider they will be affected by the determination. Submissions close on 28 February 2003. After considering the submissions, the Commission will release its final determination.

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