Fonterra works on trading platform

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Dairy giant Fonterra has appointed First NZ Capital-Credit Suisse and Deutsche Bank-Craigs Investment Partners to advise on its plan to create a farmer share trading market and provide for indirect public investment in the co-operative.

New Zealand's biggest company and the world's leading dairy exporter says the appointments are for advisory services only. 

A competitive process will be held for market volume providers, or "market makers",  a step that is still some way off, a spokesman said.

The advisers will provide the specialist expertise required to develop deep and liquid markets, and technical experience to create the new Fonterra Shareholders Market in which farmers will trade shares between themselves, and the Fonterra Shareholders Fund, which will help farmers buy or retain shares and provide the vehicle for indirect public investment in the company.

The markets are not expected to be operating until the second half of next year, the spokesman said.

The proposal for farmer share trading is the third stage of a year-long capital restructuring programme.

Fonterra's 10,500 farmer-owners currently buy and redeem shares through their cooperative based on milk production.

The practice has at times put strain on the company's balance sheet as hundreds of millions of dollars worth of shares are redeemed by farmers in times of drought or heavy farmer exits from the company.

Introducing share trading between farmers will transfer the risk to them.

The public will not be able to buy Fonterra shares but can invest in units which will pay a dividend.

- © Fairfax NZ News