High price tipped for stock offer
With the final price for Fonterra stock yet to be set, local investors are playing their cards close to their chests - but there are signs strong demand could push the price towards the high end of the range.
Fonterra said yesterday it expected to offer units in its Shareholders Fund at $4.60 to $5.50 each.
Grant Williamson, of Christchurch sharebroker Hamilton Hindin Greene, said he was confident of obtaining an allocation of stock and a top end price was "very much on the cards".
"I think it will take a little bit of explaining to clients how it is structured, but already we've seen significant interest in the float from investors, so we do think there will be some very good demand there."
Martin Poulsen, of First NZ Capital, whose firm is co-lead manager of the offer, said Fonterra's sheer scale, with a market capitalisation of around $8 billion, would attract a lot of interest.
"This has been a long time coming," he said. "Congratulations to Fonterra for being able to pull it together."
One professional investor said Fonterra had ample scope to improve its efficiency and outside scrutiny would help the business.
"It's going to improve dramatically under our gaze and it's hard to see how the [Fonterra] board won't respond to the analysis that everyone does.
"The board will get hounded if they don't respond in some way."
But the offer would be well supported and there was little downside for investors, he said. "I actually think it'll go quite well. They're hitting the market at absolutely the right time. There's a five to 10-year window of huge value add for them if they get it right."
Another professional investor said demand from investors in Asia and further afield was likely to total billions of dollars.
Units in Fonterra's new Shareholders Fund go on sale on November 5.
Trading on the NZX is expected to begin on November 30.