NZ's Fonterra units debut with strong premium

WELLINGTON Thu Nov 29, 2012 6:09pm EST

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WELLINGTON Nov 30 (Reuters) - New Zealand's Fonterra, the world's largest dairy exporter, investment fund traded at nearly a 22 percent premium in its market debut on Friday.

The units in the new fund traded opened at NZ$6.66 from the issue price of NZ$5.50, which has raised NZ$525 million ($430 million) for the farmer-owned co-operative to bolster its balance sheet and fund expansion plans.

It last traded at NZ$6.70.

More than 3 million units, around 3.2 percent of the fund, changed hands within the first five minutes of trading.

The shareholders' fund is based on Fonterra's dividends, which are influenced by global dairy prices and the performance of the company's consumer business.

Farmers committed around 5.5 million shares to the fund, well below expectations, leaving Fonterra to issue 89.8 million to ensure it reached the desired size.

It is part of a wider plan to boost Fonterra's capital structure and free up cash as it expands into Asia. Shares in the fund do not come with Fonterra voting rights, ensuring that ownership of the company remains with its 10,500 farmer members.

Local investors were allocated 58 percent of the fund's 95.5 million units, with offshore institutions holding the balance.

Separately, a closed market allowing Fonterra shareholders to trade their shares among themselves also started operation on Friday.

The company, which competes with food giants such as Nestle and Danone, expects Asian demand for dairy products to outstrip supply by 2020 and is setting up dairy farms in China and building factories in Indonesia.

Fonterra holds a 21 percent share of global dairy exports, and accounts for 7 percent of New Zealand's GDP.

($1=NZ$1.22)

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