A partial float of Fonterra shares could be back on the agenda given the cooperative’s “disappointing” sale of dry shares, analysts say.
While the cooperative is happy with $270m forked out by shareholders, the idea of buying additional shares for value added returns has not gone down well with farmers.
Commentators are not surprised that only one-third of Fonterra’s shareholders subscribed to 60 million additional shares.
Financial commentator Alan Robb, Christchurch, had not expected more than 40% of the co-op’s shareholder base to subscribe to new shares.
“In the light of the heavy oversubscription to their bond issue it must be very disappointing given that the vote in favour of the scheme was approved by 90% of farmers,” he told Rural News.
Fonterra, which needs capital to grow, will have to look at a greater level of retention and taking on additional debt to fund growth.
Robb believes the board and management will revisit a partial float of shares, a proposal that was soundly knocked back by shareholders three years ago.
“Those board members in favour of a partial listing will undoubtedly want that option brought back on the agenda.”
He says they will be pointing out that the Capital Markets Task Force report wants to see the New Zealand Stock Exchange develop a specialist exchange that caters to the needs of cooperative enterprises.
Robb expects Prime Minister John Key to be in favour of it, given his background in the money markets.
“The Fonterra Shareholders Council will again have an important role in protecting farmers against those whose interests diverge from farmers’ interests,” says Robb.
But council chairman Blue Read says a partial float of shares is out of the question.
“The board has made it quite clear that they will not visit the issue until farmers ask for it.”
Read says the $270m raised is “not a bad result”.
He agrees that the cooperative will need to raise more money by retaining a greater share of the payout, taking more debt and disposing assets.
Read says more capital will be raised when farmers have another opportunity to readjust their shareholdings in mid-2010.
However, agribusiness commentator Stuart Locke says farmers will be cautious.
