Fonterra units start trading on Friday. Photo by Sally Rae.
Fonterra units have been valued at the top of the range
at $5.50 each but demand is expected to push them up even
further when trading begins on the NZX on Friday.
The size of the fund ensures it moves straight into the
NZX-50, being larger than the market capitalisation of
Hallenstein Glasson and smaller than Freightways.
As a result of the strong interest in the Fonterra units, the
so-called fund will launch at a size of $525 million. There
is expected to be a mixture of farmers selling into the fund
with Fonterra making up the difference in units but the split
was not revealed yesterday.
It appeared that Fonterra had provided all of the 95.5
million shares into the fund, on figures supplied in the
The range provided in the prospectus was between $4.50 and
$5.50. Yesterday, Fonterra would have issued new shares at
In a move bound to cause angst among some New Zealanders, 42%
of the fund, or $220 million, was sold to institutions based
The remaining 58% of units were allocated to New Zealand
retail and institutional investors, as well as "Friends of
Fonterra", which include Bonlac Supply Co.
The Otago Daily Times understands sharebrokers had
their orders drastically scaled back, with some receiving
less than 20% of their orders. That could see the price of
the units pushed up even further on Friday.
Potential investors had paid their money before the
allocation so were allocated $10,000 of shares rather than
Existing dairy farmers with 100% of their shares intact saw
their value rise by $1 a share yesterday. For example, a
farmer with 250,000kg of milk solids and 250,000 shares
gained an extra $250,000 in capital value. That will,
theoretically, lower their indebtedness to banks.
Fonterra chairman Sir Henry van der Heyden said in a
statement that the final price was positive news for farmer
Chief executive Theo Spierings said investors recognised
there was some complexity in the structure of Trading Among
Farmers (Taf), but there was strong acknowledgement of
Fonterra's leading position and clear growth strategy.
More than 2500 members of the "Fonterra family", as well as
around 7000 retail and institutional investors had taken the
opportunity to gain exposure to the dairy sector.
"With an initial fund size of $525 million, we have been able
to ensure that those eligible under the Friends of Fonterra
and Bonlac Supply Co categories will receive their requested
Mr Spierings said Fonterra was pleased the allocations
reflected the co-operative's objectives.
The majority of units were held by New Zealanders.
"We have a good balance between retail investors, who are
more likely to hold on to their units, and professional
offshore and New Zealand investors, who are likely to
actively trade units and provide liquidity in the fund," he
Trading among farmers
Fonterra issues shares to farmer shareholders when milk
production increases and is obliged to redeem them if the
farmer shareholder stops supplying milk to Fonterra or their
milk production reduces.
The economic rights of a share are the rights to receive
dividends and other economic benefits, as well as other
rights derived from owning a share. These do not include the
right to hold legal title to the share or to exercise voting
rights in Fonterra, except in very limited circumstances. The
economic rights of the shares are held on trust for the fund.