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Fonterra releases investment fund unit price

Units in Fonterra's shareholders fund will start at $5.50 and the fund will launch at $525 million, the dairy giant says.

The price was at the top end of the range in the fund's prospectus.

The final price was decided after an institutional offer and bookbuild over the last two days.

Trading of the units starts on the NZX this Friday.
 
Fifty-eight percent of units has been allocated to New Zealand retail and institutional investors, as well as the so-called "friends of Fonterra", which includes share milkers and staff. 

That leaves 42% allocated to offshore institutions.

Because of a shortfall of farmers selling the economic rights of their shares into the fund, Fonterra will issue around 90 million shares. 

Fonterra, New Zealand's largest company, says it does not intend to permanently retain the resulting equity, but doesn't explain what it will be used for.

The company's chief financial officer Jonathan Mason says issuing new shares will dilute earnings per share by about 1%.

Holders of the units are entitled to the dividends but not the voting rights of Fonterra shares, with farmers concerned to ensure they retained control of the company.

More than 2500 members of what it called the 'Fonterra Family' and about 7000 retail and institutional investors took up the units. Among offshore parties reportedly keen to hold the units was China's sovereign wealth fund, the $US400 billion China Investment Corp.

Fonterra chief executive Theo Spierings says in a statement: “Investors recognised there was some complexity in the structure of trading among farmers, but there was strong acknowledgement of Fonterra’s leading position and clear growth strategy."

“We are pleased that the allocations reflect the co-operative’s objectives.  The majority of units are held by New Zealanders.  And we have a good balance between retail investors who are more likely to hold onto their units, and professional offshore and New Zealand investors who are likely to actively trade units and provide liquidity in the fund.”

- additional reporting by BusinessDesk

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Comments and questions

Congratulations Fonterra!

A lot more should have gone to New Zealand investors. This was poorly thought out by the board.

42% Overseas
Mmmmm

The start of the end.

New Zealand investors should have first option. This is wrong.

If it really gets up your nose, don't get mad - get even. There's a zillion companies overseas-owned that you can buy shares in with just one click of your mouse. Get into it.

Comments so neg. Get in the real WORLD .. we are moving ahead.

I hope NZers retail investors get first priority allocation on MRP. And I don't mean a measly $2000 from the public pool. John Key wouldn't get out of bed for that amount of money.

My bid for shares cut by 66%. Someone overseas very happy. So much for the small Kiwi investor.

Mine was cut completely with one broker (not being one of their managed clients) after they encouraged me to double my bid as it would be scaled back, and another I am aware of was halved with another broker. I hope the overseas bids were similarly scaled back?!

Good result. Well thought through and priced well. Well done to Fonterra's board.

A very poorly advised deal - 42% offshore! the desired funds would have been covered within NZ ....

I agree that the listing is great for Fonterra and the NZ market.
However, I am very disappointed that NZ investors money is not good enough for Fonterra - we bid at $5.50 and got nothing.

This has been a very poorly conceived transaction. The unit price is on a one way journey to $10, yielding 3.2%.

At this level it'll be one-way traffic of suppliers exiting shares and ceasing supply.

The big brains who designed this mess have replaced redemption risk with supplier flight.

Why on earth would they scale back NZ domiciled investors so overseas investors could have shares at the IPO? No reason why overseas investors couldn't buy in once the fund started trading?

My allocation cut by 75%. Not a good outcome for a local investor who has worked and been associated with Fonterra for 45 years.

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