Fonterra units priced at top of range

ANDREA FOX
Last updated 16:43 27/11/2012

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The final price for a unit in the new Fonterra Shareholders' Fund is $5.50 - at the top end of the range provided in the fund's prospectus.

The price was decided after institutional and NZX firms submitted their bids for units yesterday and today.

Fifty-eight per cent of units have been allocated to New Zealand retail and institutional investors, as well as the Friends of Fonterra (including Bonlac). The remainder has been allocated to institutions based offshore.

Chairman Sir Henry van der Heyden said the price was positive news for farmer shareholders, as Fonterra shares on the Fonterra Shareholders' Market are expected to track the price of the units.

Trading of the units starts on the NZX on Friday.

Chief Executive Theo Spierings said investors recognised there was some complexity in the structure of Trading Among Farmers (TAF), the capital restructure that has ushered in unit and farmer trading, but there had been strong acknowledgement of Fonterra's leading position and clear growth strategy.

As a result of the level of interest, the fund would launch at a size of $525 million, he said.

More than 2500 members of the 'Fonterra family' - farmers, staff, sharemilkers and former shareholders - as well as around 7000 retail and institutional investors had taken up the opportunity to gain exposure to the dairy sector and Fonterra's future success, Spierings said.

"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 Company categories will receive their requested amounts," said Spierings.

"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," said Spierings.

Following the closure of the supply offer, Fonterra has confirmed it will issue around 90 million shares to the Fonterra Farmer Custodian. This will support a fund size of $525m.

The issue of shares by Fonterra would, at the most, affect the co-operative's earnings per share by about one cent. Fonterra does not intend to permanently retain the resulting equity.

Spierings said the Fonterra Shareholders' Market and fund were on track to begin operating from Friday.

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