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Deutsche Bank to advise Fonterra on share trading

Fuseworks Media
Fuseworks Media

Wellington, Sept 2 NZPA - Fonterra has appointed First NZ Capital-Credit Suisse and Deutsche Bank-Craigs Investment Partners to advise it on creating two new markets, one to allow farmer-shareholders to trade shares among themselves, and another to allow indirect public investment in the co-operative.

Fonterra chief financial officer Jonathan Mason said today the cooperative want advice on developing a "deep and liquid market" for the trading of Fonterra shares among farmer-shareholders.

Fonterra's external advisers -- including First NZ Capital-Credit Suisse and Deutsche Bank-Craigs Investment Partners -- had specific capital markets experience. Deutsche Bank earlier this year took over nearly half the shares in Craigs, one of the country's largest private wealth and investment management firms.

Asked whether the Fonterra Shareholders' Fund which will sell investment units to institutional and retail investors -- providing an opportunity for public exposure to the dairy sector -- will be classed as an initial public offering (IPO) requiring a prospectus, a Fonterra spokesman told NZPA it was "too early to tell".

The fund will be capped at 25 percent of total shares on issue, or about $1.25 billion based on Fonterra's current level of shareholder equity, will allow farmers needing cash to free up some of their share capital by selling rights to dividend flows without losing ownership of the shares.

The fund will kill two birds with one stone -- allowing farmers retain control of voting rights and ownership of the shares, but also giving the public access to dairy dividends without having to own a farm.

Fonterra's 10,500 farmers buy shares in line with their milkflows, but the cooperative's liability to buy back the shares on demand has place strains on its balance sheet.

When Fonterra chairman Sir Henry van der Heyden put what he described in 2007 as a "bold and brave" proposal to list a Fonterra operating company on the NZX as early as 2010, Deutsche Bank was the adviser which estimated the cooperative's then assets of $12.6 billion and revenue of $13.9 billion would translate to a market capitalisation of about $8 billion, which Deutsche Bank estimated could be worth around $10 billion by 2010.

Fonterra directors have since publicly eschewed the concept of selling 20 percent of the shares to institutional investors and members of the public.

"We will be accessing professional advice from a range of advisers," Mr Mason said in a statement.

Fonterra has also appointed NZX to help design the trading platform for the shares.

"The farmer-only exchange for trading shares, which will operate on the Fonterra farmer intranet (Fencepost), will be unique, and will be built from scratch," Mr Mason said. Fonterra would be using NZX in much the same way as it used an international company, CRA, to design the global dairy trade platform for its internet commodity auctions.

NZX was chosen because of its experience in designing and building trading markets, as well as its knowledge of local conditions and the local regulatory environment.

"It is too early to speculate on what shape the market will take," Mr Mason said. "Trading is not expected to begin until late in 2011 at the earliest".

NZPA WGT kca gt

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