Worse Is Yet To Come?, page-1324

A great and also a perplexing question.

As you know the way the MGC Trust and attached Units to the Trust were set up so that they can be essentially be absolved by the company with relative ease. The problem with that is the backlash and possible legal actions that may result as many Unit holders are actually ex-milk suppliers.

Also if the Trust is sunset it comes with another complexity and that is the STP (Share Trading TradingPlatform) that was set up as part of that arrangement. To absolve this would be expensive from possibly a contractual termination cost for ending it early and also the sheer cost of unbundling it from the business.

In my limited view the only real option they have, other than doing nothing and letting it continue, is to make MGC a fully listed company under the (Cth) Corporations Act and remove itself from the protection of the state based Co-operatives Act. By doing this it allows for a merging of the mandatory shares held by milk suppliers and units held by other parties. WCB did it, BGA did it and so can MGC if it chooses. MGC has some issues than neither WCB nor BGA had but they have been discussed and are surmountable.

There are various versions of the above but they make it complex and invite other problems and one of those is to split MGC and list the brands and keep MGC core as a milk trading platform (using the STP as the basis for that) but that would depend on the outcome of the ACCC inquiry later this year. And there are other slight variations on this theme as well.

However I do keep coming back to a full ASX listing and merging the Unit and Shares and making them equals and also removing the umbilical cord of milk suppliers and ex-milk suppliers not being able to freely trade their shares or units. This latter part relates to the co-op status as you know and is out dated and prohibitive on the farmers and largely what causes great angst and grief between suppliers-shareholders and investors-unitholders. To do this requires a large percentage of the current suppliers to support a proposal to change the MGC Constitution and only the shareholders can do this, unit holders have to sit on the sidelines and watch, so MGC need to offer the shareholders something in return for their support. Releasing their restriction of trading their shares is one such incentive I think would be enough.

Now after all that, if you are still reading my overly long-winded post, this change to MGC would have industry wide impacts but as time goes on those industry wide impacts are beginning to change and that relates to what does the FGMP hinge itself on as MGC was the previous FGMP setter (in concert with Fonterra).

*Phew* Done for now but I have probably missed some key bits somewhere.

Your views?