What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The TAF Offer Document invites the public to gain exposure to the cooperative's performance by purchasing units in the Fonterra Shareholders' Fund. Institutional investors, Fonterra suppliers and employees in Australia and New Zealand will be able to buy units from the Fund. Holders of these funds will get Fonterra's dividend payout but have no voting rights.
Chairman Henry van der Heyden says the Fonterra Shareholders' Fund would support liquidity in the Fonterra Shareholders' Market, allowing Farmer Shareholders to trade Fonterra Shares among themselves with a more flexible structure, rather than buying and redeeming them from the cooperative.
"This will provide permanent capital for Fonterra and reduce redemption risk, while preserving 100% farmer control and ownership of the cooperative," says van der Heyden.
"It is a historic day for the cooperative. The fund provides a unique opportunity for the public to gain exposure to the financial performance of Fonterra and the global dairy industry.
"Farmer Shareholders and Unit Holders will invest in the performance of Fonterra through separate structures. What they both have in common is the chance to be part of the continuing performance of our cooperative – a New Zealand success story," says van der Heyden.
Chief executive Theo Spierings says Fonterra's performance shows it is a leader in the international dairy market, and a unique investment opportunity.
"In New Zealand in the 2011/2012 dairy season, we collected approximately 17 billion litres of milk – and more than 2 billion litres overseas.
"NZ Milk Products is the backbone of Fonterra, collecting milk, manufacturing dairy products, and exporting to customers around the world. Our sales networks reach customers in more than 100 countries. Products range from everyday dairy nutrition powders, to advanced dairy nutrition products, and our customers include five of the world's biggest infant formula manufacturers and many of world's largest food companies.
"Fonterra builds on earnings from New Zealand and internationally-sourced milk through integrated regional businesses which focus on branded consumer dairy products, and out-of-home foodservices. Our regional businesses achieved sales of around $6 billion across a diverse range of geographies and product formats in the last financial year.
"Fonterra is well placed to meet rising global demand for dairy, with 72% of our NZ Milk Products' sales volumes and 46% of our regional business revenues coming from emerging market regions in the last financial year."
Fund chairman John Shewan says the Fonterra Shareholders' Fund is a unit trust that will acquire the economic rights of Fonterra shares and issue units to investors.
"Farmers and other investors can purchase units in the fund which will give them exposure to the economic rights of a cooperative share – dividends and capital gains or losses on those shares," says Shewan.
The indicative price range for units in the fund is $4.60 - $5.50. The final price payable per unit is expected to be announced on or about November 27, 2012 following the completion of a bookbuild process, under which selected institutional investors and NZX Firms are invited to lodge bids indicating the number of units they wish to apply for at a range of prices. The final price could be within or above the indicative price range.
