The highly anticipated Fonterra Shareholders Fund was launched on the NZX yesterday amid a frenzy of buying, as investors scrambled to get a slice of earnings from New Zealand's biggest company.
The fund - a unit trust giving investors exposure to the dairy giant's profits through dividend payments but without the ownership rights of shares - debuted at $6.66 a unit, about 22 per cent higher than the offer price of $5.50.
The units closed at $6.85, having soared as high as $6.95 during the day, a level NZX chief executive Tim Bennett hailed as "tremendous".
Fonterra chief executive Theo Spierings was clearly delighted by the opening prices.
"This is an exciting day for us. It's a historic day for our farmers, our business and for New Zealand.
"We are seeing the true market price right now."
The trading was shown on live feeds in a marquee at the new Fonterra milk processing site at Darfield, 45 kilometres west of Christchurch, attended by more than 350 farmers and other guests.
The plant cost just $25 million more than Fonterra raised with its listing.
The FSF was matched by the launch of Fonterra Shareholders Market, a private market run by the NZX where farmer- shareholders can trade shares in the dairy co-operative, and are redeemable as FSF units should they want to cash out.
Andrew Bascand, managing director of Harbour Asset Management, said the launch of the fund came after years of frustration among investors who long wanted to access earnings in the agricultural sector - which explains some of the demand at the FSF debut yesterday.
Bascand said investors in the FSF were not buying into the milk price, but growth opportunities in Asia, which Fonterra had been targeting through the sale of its own branded products and via raw ingredient sales to other food good producers.
"The basic drivers [of the FSF price] are Asian growth and the fast growth in food services sector," he said. "If you can only keep an eye on two things, those would be the ones to watch."
Demand for FSF, with more than 21 million units changing hands in five hours, may have been fuelled by the delayed Mighty River Power float, which was pushed back into 2013 while the water rights issue is settled.
However, Bennett said that it was a good sounding board for the Government and private businesses considering a listing, with the issue to retail investors well oversubscribed. "We've got businesses with growth opportunities in Asia and globally, and it would be a real shame if those businesses were sold to a foreign investor outright when we've got New Zealanders with savings who are willing to invest."
Yesterday's float was not universally welcomed, with the Labour Party's primary industries spokesman Damien O'Connor calling it a victory for investors at the expense of farmer shareholders.
Farmers will retain their ownership of the co-operative under the new scheme, but O'Connor said Fonterra would face pressure from investors.
"Any farmer or commentator who thinks a large-scale investment by outside investors won't bring an element of control is totally naive," he said.
- © Fairfax NZ News
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