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Fonterra Shareholder's Fund units debut at NZ$6.66, up 21% from NZ$5.50 float price on strong demand; close up 25% at NZ$6.85

Posted in Rural News Updated

By Bernard Hickey

Units in Fonterra's Shareholder Fund started trading on the NZX at midday at NZ$6.66, up 21% from the NZ$5.50 float price.

Demand for the NZ$525 million of units in the fund was strong. Over 2,500 farmers and Fonterra shareholders were allocated units in the fund, while a further 7,000 institutional and retail investors were allocated units, although many were scaled back.

Fonterra said 58% of the units were allocated to New Zealand funds and investors. Bankers had said the retail offer for the units had been over-subscribed.

By mid-afternoon the units had risen to NZ$6.80 and were the most traded share on the NZX with NZ$146 million worth of units changing hands. The units closed up 25% at NZ$6.85 with NZ$166 million of shares trading on the first day.

Investors saw paper gains of more than $100 mln. These prices implied a value for Fonterra as a whole of some NZ$10 bln, about NZ$2 bln more than at the price the shares were offered at to investors.

The units do not have any voting rights and simply funnel dividends attached to the underlying shares and any gains or falls in the underlying share price to the owner of the unit. 

Only 260 farmers offered to sell the economic rights to 5.5 million shares in the intial public offering, which meant Fonterra issued fresh shares to make up the remainder of the backing shares needed to back the units. The equity raised in this issue would be retained and the shares held by the Fonterra Farmer Custodian.

Fonterra said it would not permanently retain the equity and would eventually be returned to farmers as they increased production.

Darfield plant opened

Fonterra's units started trading as it formally opened the NZ$550 million Darfield milk processing plant in mid-Canterbury. The plant is Fonterra's first brand new site since its formation 11 years ago and the first by the cooperative and its predecessors in 14 years.

Fonterra CEO Theo Spierings told farmers, workers and media in a marquee on the site that it would have the capacity to produce 45 metric tonnes of milk powder each hour from the milk from 12 tanker deliveries an hour.

The plant, which already has one drier and have a second drier from August next year, can process the milk from 1,000 cows in 10 minutes, Spierings said.

It processes the milk from 50 farmers in central Canterbury. The building of the plant allows Fonterra to reduce the amount of travel by tankers, which had previously to drive to Clandeboye in South Canterbury. Fonterra said this would save 20,000 kilometres of tanker driving each day.

The plant produces bags of milk powder, which are then packed into containers and shipped to China, Southeast Asia and the Middle East in containers.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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12 Comments

Like all the property

Like all the property investors who do a quick flick the institutions and individuals who stag their units on the market today  will voluntarily return tax on their profits. After all the NZ government would benefit from all the tax coming in when it is in such hard times.

What a stuffup by those

What a stuffup by those running this. Thought I would sell some Friends of Fonterra units to try out the system. Friends of Fonterra units aren't showing up at this point in time, 12.49pm! So no trading for this farmer of units. Computershare tells me "its a glitch & they are working on it." Ah, well, it was only a few. If I was wanting to sell a large number, it might be different.
Any other shareholders having issues?

Great to see all systems go.

Great to see all systems go. :-)

I was trying to withdraw fund

I was trying to withdraw fund from house equity to purchase the units, but it was too late. The offer was fully subscribed with a couple of days.  What a shame.  

Correct me if i am wrong but

Correct me if i am wrong but i can just see a big row ahead between farmers and shareholders. Fontera says it will pay x$ per kg and the shareholders jump up and down "thats too much, what about the shareholders" and the farmers reply "no we are the producers etc" and the shareholders say "but you sold your rights to the profits and yet you still want the profit" Blah, Blah, Blah
So much for the clever people

' At this stage ' all

' At this stage ' all shareholders are farmer producers and this won't be changing without further vote for change by shareholders.
currently now traded are shareholding amongst farmers , and investment units amongst anyone     in the world . unit holder has no say in the running of Fonterra , they do not attend shareholder meetings and have no vote . the unit holder is there to decide the value of Fonterra based on the fundamentals as they see them thereby discovering the price for trading of shares amongst farmers. clever people do not sell their rights to profits and still think they have a right to them !

Tragedy for New Zealand.

Tragedy for New Zealand. Selling the family silver. Dumb. Dumb. Dumb.

The equity raised in this

The equity raised in this issue would be retained and the shares held by the Fonterra Farmer Custodian.
Fonterra said it would not permanently retain the equity and would eventually be returned to farmers as they increased production.
 
Who is responsible for under pricing this issue by such a colossal margin? The numbers of those needing to chase high yield instruments at any cost, in a world flooded with government liquidity, was negligently underestimated - heads must roll if not seen on farmer's pikes first.

and the exact time the deed

and the exact time the deed was done ..... the Monday/Tuesday of last week.
 

by Henry_Tull | 28 Nov 12, 9:28am

0

Vote up!

Ex Oz AFR:
Fonterra's $NZ525 million equity raising closed well oversubscribed at $NZ5.50 a share, the top of the bookbuild range.
....
The dairy giant briefly considered re-pricing the deal, but decided it was better to have an oversubscribed offer than up the price and irrate investors....
 
Note to self: Think of this as value shift from old shareholders to new friends....
 
http://www.interest.co.nz/rural-news/61887/fonterras-trading-among-farme.... a float diary

 irrate investor my......... more like trebles all round.... these blokes are laughing..... at the rest of us.
 

 

having overheard one of

having overheard one of Fonterra's own local investment banking advisers describe the structure as "a dog".
 
http://www.stuff.co.nz/business/opinion-analysis/8035810/NZ-Inc-put-out-...
 
In these situations, the upshot is what some people describe as a "transfer of value" - ie, the people who pay $5.50 get more value than those who pay $6.85. The question is, does it matter if 42 per cent of the value - about $50m, say - is transferred to foreigners?

http://www.nzherald.co.nz/bus

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1085...

Fonterra's Aussie giveaway leaves sour taste
So who was it that was running the show- which bank? Of course they priced it low and allowed insiders to make a nice tidy profit from day one. This is how the game works. There was no mistake, no error- maybe the magnitude of the profit, making the scam very obvious. The bankers were working for themesleves all the way. Plenty of people who come to this site  will know exactly how this works, far better than me, IPOs are a way of returning the favour, free risk free profits for insiders who will again return the favour to the banks. NZ and Fontera are the suckers in the room. We always were.

42% to Australian

42% to Australian 'investors'.... more likely 42% to John Key's supporters who helped him into power in NZ and collude with him to sell off NZ at bargain rates.