(Recasts, updates price, quotes)
WELLINGTON Nov 30 New Zealand's Fonterra
Shareholders Fund surged on debut on Friday, trading as much as
22 percent above its issue price, as investors chased exposure
to the world's largest dairy exporter.
Units in the fund traded as high as NZ$6.71
compared with the issue price of NZ$5.50, with nearly 14 million
units, close to 15 percent of the fund changing hands. It last
traded at NZ$6.66.
The fund, which is based on the dividends from Fonterra
shares, raised NZ$525 million ($430 million) to help the the
farmer-owned co-operative to bolster its balance sheet and fund
"Some will have bought this for its yield at around 5
percent, but others will be buying for its exposure to Asian
growth, and for exposure to the agri-food chain," said Andrew
Bascand of Harbour Asset Management, which had bought on behalf
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, and has forecast a dividend
of 32 cents a share in the current season.
The fund is part of a wider scheme to boost Fonterra's
capital structure and free up cash as it pursues ambitious plans
to expand through Asia, particularly China, where it is setting
up dairy farms.
Fonterra, which competes with food giants such as Nestle
and Danone, produced about 17 billion litres
of milk in 2011/12 in New Zealand and around another 2 billion
litres in overseas ventures, including in Australia and Chile.
The firm controls around 21 percent of the world's dairy
exports and is spending around NZ$100 million to develop two new
large scale dairy farms in China as part of a plan for an
integrated milk business.
It has also moved to increase processing and expand
distribution channels through Asia to take advantage of the
growth in demand from burgeoning middle classes, where it
expects demand to outstrip supply by 2020.
"Fonterra is well placed to meet rising global demand for
dairy, with 72 percent of our...sales volumes and 46 percent of
our regional business revenues coming from emerging market
regions in the last financial year," said chief executive Theo
The United Nations's Food and Agriculture Organisation has
said the world needs to boost food output by 70 percent by 2050
to meet demand, with highly populated countries such as China,
seeking sources at home and abroad to guarantee food security.
This has also seen Chinese companies invest in New Zealand
farms and take a cornerstone stake in one of the country's
largest rural services firms, PGG Wrightson Ltd.
Units in the new Fonterra fund do not come with voting
rights, ensuring that ownership of the company remains with its
10,500 farmer members.
Separately, a closed market allowing Fonterra
farmer-shareholders to trade their shares among themselves also
started operation on Friday.
(Reporting by Gyles Beckford; Editing by Richard Pullin)