Almost 99% of Fonterra farmer shareholders have approved a divestment capital return scheme worth NZ$3.2 billion.

During a special virtual meeting, 98.85% of the total shareholder votes cast were in support of the capital return, which is expected from the sale of Fonterra's global consumer and associated businesses.

Last October, farmer shareholders in the New Zealand dairy co-op backed plans to sell Fonterra's Mainland Group to French dairy giant Lactalis for NZ$4.22 billion.

Fonterra

Subject to completion of the sale, Fonterra intends to return approximately NZ$3.2 billion of capital to shareholders, this equates to approximately NZ$2 per share.

The mechanics of how this will work are complex, involving a share buyback, cancellation, and subdivision by way of a court-approved scheme of arrangement.

However, the co-op said the scheme is designed to ensure that no shareholder’s compliance with Fonterra’s minimum shareholding requirements or their voting entitlement is affected by the capital return.

Authorities in New Zealand have also provided a binding tax ruling that the amount paid to shareholders will be treated as a return ofcapital and not as a dividend for New Zealand income tax purposes.

Fonterra said this means the payment should generally not be taxable for shareholders.

Vote

In a statement, Fonterra said that today’s result means the co-op can now "seek final court approval to undertake the capital return of $2.00 per share to shareholders and unit holders, subject to the divestment of Mainland Group to Lactalis being completed".

"Fonterra expects the transaction to be complete in the first quarter of the 2026 calendar year, subject to separation of the businesses from Fonterra and provided the remaining regulatory approvals are received within the expected timeframes," the statement added.

Once these steps have been completed, the co-op said it will confirm the record date for the capital return, with payment scheduled shortly afterwards.

Fonterra chair Peter McBride previously said that the decision to divest the Mainland Group businesses is "significant, and one the board did not take lightly".

“The divestment will usher in an exciting new phase for the co-op.

"We will have a simplified and more focused business, the value of which cannot be overstated," he said.