Fonterra units priced at $5.50, top end of range, with 42 percent sold offshore

Tuesday 27th November 2012

Fonterra Cooperative Group priced its units at $5.50 apiece, the top end of the range proposed in a bookbuild, with strong global demand ensuring 42 percent of the fund has been sold to overseas investors.

Units in the $525 million Fonterra Shareholders' Fund are scheduled to begin trading on the NZX at noon on Friday, giving liquidity to the Trading Among Farmers scheme that ends the company's annual redemption risk and gives more certainty to its balance sheet.

The indicative range for the units was indicative price range $4.60 to $5.50 and the price was set after a bookbuild by institutions and NZX firms. Some 58 percent of the units were allocated to New Zealand retail and institutional investors and the class of investors known as Friends of Fonterra, which includes Australia's Bonlac. The rest were sold to offshore institutions.

"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," said chief executive Theo Spierings. "There was strong acknowledgement of Fonterra's leading position and clear growth strategy."

Fonterra will issue about 90 million shares to the Fonterra Farmer Custodian to make up the shortfall of shares offered into the fund by Fonterra's farmers. The issue of new shares would dilute earnings per shares by only about 1 cent and the company doesn't intend to permanently retain the resulting equity, it said.

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 2,500 members of what it called the 'Fonterra Family' and about 7,000 retail and institutional investors took up the units. Among offshore parties reportedly keen to hold the units was China's sovereign wealth fund, the US$400 billion China Investment Corp.

BusinessDesk.co.nz

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