Farmers TAF response underwhelms
New Zealand Fonterra farmers and stakeholders have given the dairy giant’s new share trading capital structure, TAF, a highly cautious reception.
Around 2500 farmer shareholders, sharemilkers, retired farmers and staff have applied for units in Fonterra’s proposed $500 million listed trust fund, and 260 farmers, a fraction of the 10,500 farmer-shareholder base, have offered to sell economic rights in their shares into the fund.
A further 260 Australian dairy farmer suppliers have applied to buy units in the fund.Fonterra chief executive Theo Spierings said the 2500 New Zealand "Friends of Fonterra" applicants for units were made up of nearly 900 farmers, 200 sharemilkers, 70 retired farmers and more than 1300 staff.
On the supply offer side, the 260 farmer-shareholders interested in selling their economic rights represented about 5.5 million Fonterra shares.
"It is clear that we have seen limited interest from farmers at this time," said Spierings.
"We’re hearing from our farmer shareholders that a number of them are likely to wait and see how the units trade before deciding to sell economic rights of some of their shares into the fund – but many are showing confidence in Fonterra by applying to buy units."
Chief financial officer Jonathan Mason said with current low interest rates could mean not all farmers were looking for alternative sources of cash.
"Circumstances may change in the future and that’s why we are looking to provide further opportunities for farmers to sell economic rights.
"As indicated in the fund prospectus, the next opportunity could be after Fonterra’s interim results for 2013 have been announced, which is likely to be in March."
Fonterra has said it will issue enough shares to achieve the $500 million minimum fund size required under the Dairy Industry Restructuring Act (DIRA) and any oversubscriptions of up to a further $25 million.
The number of shares to be issued will depend on the final price of fund units, which will be determined following the bookbuild process next week.
Mason confirmed the issue of shares by Fonterra would, at the most, affect the co-operative’s earnings per share by about one cent.
Shares issued by the co-operative will be held by the Fonterra Farmer Custodian who will hold the economic rights for the fund.
Fonterra does not intend to permanently retain the resulting equity.