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 FSF allows outside investors unable to hold shares in Fonterra to invest in units which have been trading on both the ASX and the NZ Stock Exchange.
However, after completing a review of its equity listings in November last year, Fonterra's board decided to delist FSF from the ASX to reduce cost and administrative burdens of complying with multiple stock exchanges.
The move comes as Fonterra is going ahead to sell its Oceania consumer business, that includes processing plants and leading consumer brands in Australia.
In an announcement to NZX last week, Fonterra general manager capital markets & investor relations, Philip van Polanen, said that FSF has submitted a formal application to delist from ASX and trade solely on the NZX.
He notes that ASX will agree to the request upon the satisfation of certain conditions, which FSF intents to satisfy prior to its removal.
Units held geographically in Australia represent 7% of FSF, however, units registered to trade on the ASX is only 4%, with 96% of units registered under the NZX.
Polanen notes that the NZX listing provides sufficient liquidity to unitholders and that consolidating the listing on the NZX would be beneficial to liquidity.
"FSF's secondary listing on the ASX also imposes additional corporate and administrative costs and compliance obligations, which the Manager considers outweigh the benefits of remaining on the ASX and are no longer in the best interests of FSF's unitholders.
"We also note that a significant majority of FSF's unitholders are based in New Zealand."
Polanen says FSF's units will no longer be quoted or traded on the ASX, meaning that unitholders will no longer be able to sell their units and realise their investment in FSF via ASX trading.
Instead, unitholders wishing to sell their units will only be able to do so via the NZX or via off-market private transactions (subject to compliance with New Zealand law) and FSF will no longer be subject to the obligations under the ASX Listing Rules.
At FSF's annual meeting in November last year, FSF chair Mary Jane Daly told unit holders that Fonterra had consulted with them on the matter.
"And we are supportive of the shift to a single listing for FSF," Daly told the meeting.
"Broadly speaking, dual listings are becoming less popular due to the increased cost, regulatory complexities, and administrative burdens of complying with multiple exchanges.
"In addition, advances in global trading technology make it easier for companies to access international investors through a single primary listing.
"Units held geographically in Australia represent 7% of the Fund. However, units registered to trade on the ASX is actually only 4%, with 96% of units registered under the NZX, with several Australian institutions preferring to hold and trade units in the bigger pool of liquidity here in New Zealand."
If the de-listing goes to plan, the FSF units will be suspended from trading on ASX at the close of trading on Tuesday, February 25. FSF will be removed from official list of the ASX at the close of trading on Thursday, February 27. Friday, February 28 will be the first day FSF units will trade solely on the NZX.
