FSF - Fonterra

[RTM]

I've had some shares of General Electric for a while. A meaningful number (for me).
Over recent years they have split the company into bits.
GE has become GEV (Power and Generation ) GEHC (HealthCare) WAB (Railway Equipment) with GE becoming Aerospace). Shareholders in GE were "given" shares in each of the new entities which are of course listed. So far so good and all the children are doing well. I am pretty sure GE has retained shares in all the children, but can not be sure...have not checked.

I guess they did this as like FONTERRA, they could not manage the complexities of operating the whole thing under one umbrella.

I hope FONTERRA will consider something like this model. I don't think we want to just offload all these brands and manufacturing to an offshore entity. Not good for NZ Inc, even if there is a short term one off high for the current shareholders of FONTERRA.

PS Thanks for posting the link GTM

[GTM 3442]

I'm not sure that Fonterra and GE is a good comparison.

At it's sprawling zenith, GE was a collection of discrete, stand-alone divisions, while Fonterra is (was?) a single-industry, vertically-integrated outfit - from the farm, through a maze of stainless steel, to the yoghurt pottle in a Berlin supermarket or the can of baby formula in a Chinese apartment.

Now, given all the i's that had to be crossed, and all the t's that had to be dotted to allow Fonterra to be spawned, have things now reached the point where the whole thing gets unwound back into it's original component parts?

[mike2020]

The Herald had an article this morning about selling off the value-add businesses. The people that bought Tip Top have increased turnover and profitability significantly in the first year and I think they said Tip Top is also exporting more ice cream.

The real argument for the sell offs is that Fonterra mgmt and staff aren't very good at running these types of value-add businesses. I guess as long as the buyers of the businesses don't use transfer pricing to make the profits in a tax haven, NZ inc might be better off.

That said I recall an article just the other day where 3M NZ found an error that raised their NZ support services costs from $41k to $21mill. Whoopsie that was a bit of a blunder.
https://businessdesk.co.nz/article/l...penses-blooper

Sorry a Business Desk article from the herald even I cannot access online.

The sale of the power transmission network in Wellington also springs to mind, Chalkies article years ago was very enlightening. I learnt about thin capitalisation and transfer pricing and how it is not good for NZ.

mike2020 might have better information and a different view, probably has a better mind than me as well. Farmers are very sensitive about these things. I called a table of farmers a bunch of country bumpkins the other day and they got very upset and defensive. I guess they did not appreciate their table probably held more wealth and generated more export earnings than all the other tables combined at the pub, not sure why they worry about how smart they are, let the results speak for themselves.

They perhaps could be questioning the intelligence of top mgmt at Fonterra. They pay top dollar for them, shame they can't work out how to run their value add businesses. That said I think Miles has been doing a lot better than any of his recent predecessors, although that is based on vague memories of distant newspaper articles.

Bumpkins are the worst, short sighted intergenerational asset holders at best.

Rumor is 2 bucks a share capital returns to company. What they do with that would be anyone's guess. That branch has been a regular underperfomer and it looks better now under a lower payout. Apparently. Massive savings to follow. Apparently. After decades of dairy talk...believe what you want.

Miles was to me at the time a new positive beginning and an end to a campaign of world domination fonterra never had the capital for.

[bull....]

another short sighted decision. they should have floated the consumer division and retained ownership. better management under a public model could have made the consumer division a success.
left as a one hit wonder easily disrupted in the future.

[RTM]

I'm not sure that Fonterra and GE is a good comparison.

At it's sprawling zenith, GE was a collection of discrete, stand-alone divisions, while Fonterra is (was?) a single-industry, vertically-integrated outfit - from the farm, through a maze of stainless steel, to the yoghurt pottle in a Berlin supermarket or the can of baby formula in a Chinese apartment.

Now, given all the i's that had to be crossed, and all the t's that had to be dotted to allow Fonterra to be spawned, have things now reached the point where the whole uthing gets unwound back into it's original component parts?

Understand what you are saying about GE. Nevertheless, I consider the comparison valid, even if the products being spun off are linked to the parent in a more integrated way than the GE Divisions. What Fonterra are saying is that it takes a different set of skills to make, market and sell consumer products than ingredients. The GE scenario achieves exactly that, leaving the ownership of the two or more companies where it sits at the moment. With the shareholders. Who can then decide to sell should they not want to hold.