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Fonterra's $500 million share market offer has attracted strong investor interest, requiring brokers to heavily scale back investor applications for units in the fund, market sources said.
The so called book-build for brokers and others connected to the co-operative opened on Monday and closes on November 21.
"The scaling has been pretty severe and I understand the retail bids were well in excess of $1 billion," said one investment source.
One investor said he had put in an application with his broker for $200,000 worth of units, only to have it scaled back to just over $10,000.
The first phase of Fonterra's Trading Among Farmer's share trading scheme started on Friday, when it started to gauge at what level farmers would be prepared to sell economic rights to their shares.
The rights will go into the Fonterra Shareholders Fund, which the investing public will be able to gain access to, and which is expected to be worth not less than $500 million.
An institutional book-build will take place on November 26 and 27. Pricing and allocations will be announced on November 27 and the units are expected to start trading on the ASX and NZX on November 30.
The units will form an integral part of Fonterra's Trading Among Farmers (TAF) share trading scheme, which is aimed at offsetting so-called redemption risk and at giving farmers increased financial flexibility.
As it stands, Fonterra has to buy farmers' shares when they choose to exit the industry, which exposes the co-operative when a large number of them choose to sell at the same time.