What you will pay for Fonterra's investment fund units
"The yield seems low. I was expecting more than that. Will be interesting to read the prospectus."Featured comment
Fonterra has set an indicative price range of between $4.60 and $5.50 per unit for its $525 million investment fund, with an expected yield of between 4.2% and 5%.
The global dairy giant, which is New Zealand's largest company, released its 170-page prospectus and investment statement for the fund today, which will give non-dairy farmers an opportunity to gain exposure to the co-operative's performance for the first time.
Fonterra says it wants to raise $500 million of units, with oversubscriptions of up to a further $25 million.
This will then allow Fonterra's 10,500 farmers to trade shares among themselves in a private market.
The indicative price range for the units is between $4.60 and $5.50, with the final price confirmed on or about the end of November, after a bookbuild with selected institutional investors and NZX firms.
Fonterra says the final price could be within or above the indicative range.
At the company's dividend forecast of 32 cents, the net cash, tax-paid yield of a $500 million fund would be between 4.2% and 5% per unit.
In that range, Fonterra's implied market capitalisation and pro forma net debt will be between $11.14 billion and $12.51 billion.
The company is forecasting a 10.6% increase in its 2013 profit to $690 million, while normalised earnings before interest and tax is expected to rise 5% to $1.08 billion.
Offers in the unit fund open in stages in early November, with pricing and allocations expected to be announced on November 27.
Economic rights – no votes
The Fonterra Shareholders' Fund is a unit trust which acquires the economic rights of shares and issues units to investors.
Investors have no voting rights at farmer shareholder meetings.
From November 2, Fonterra's farmers will be able to sell the economic rights to their "dry" shares and up to 25% of their "wet" shares – those allocated to farmers depending on the current and previous season.
Fonterra will issue units to make up any shortfall between what farmers sell and $500 million.
There is no general public offer, with investors having to buy units through a broker firm offer – available to New Zealand resident clients of NZX firms which receive an allocation.
There is also a stakeholder offer to "Friends of Fonterra Offer" for employees, sharemilkers and shareholders, and $25 million of units set aside for Australian shareholders.
The broker and stakeholder offers are expected to open early next month, while the institutional offer and bookbuild will occur on November 26 and 27, followed by an announcement of pricing and allocations.
Institutional offers will be made in Fonterra's key markets – New Zealand, Australia, Asia and Europe – but not the United States.
Trading of units on the NZX and ASX is expected to begin on November 30.