Sharebroker allocation over-subscribed

Last updated 05:00 10/11/2012

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Demand for stock in dairy giant Fonterra's $500 million Shareholders Fund has vastly exceeded supply, with the broker offer over-subscribed by 10 times.

As a result, retail investors will be able to buy only a fraction of the stock they wanted. One firm, Macquarie, received 6 per cent of the stock it applied for.

The offer to clients of sharebrokers opened on Monday and closes formally on November 21. The size of the allocation to retail investors has not been revealed, although some sources say about one-third of the fund was available to clients of New Zealand retail brokers, with one-third going to institutions and one-third to overseas investors.

Fonterra has indicated a price range of $4.60 to $5.50 a unit. At $5.50, the units have a projected gross yield of 5.8 per cent, based on a forecast dividend of 32c.

Market sources say the level of over-subscriptions suggested firms were inflating their orders in the expectation their applications would be scaled back.

The decision on how much each firm got was made by Fonterra.

Fonterra has the right accept over-subscriptions of up to $25m.

The Shareholders Fund is a listed unit trust carrying rights to payments equal to Fonterra's dividends but no ownership of the business itself, which remains a co-operative owned by its farmer suppliers.

The offer to institutional investors opens on November 26 and the fund is due to list on the NZX on November 30.

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