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Thread: FSF - Fonterra

  1. #1
    Guru Dr_Who's Avatar
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    Default FSF - Fonterra

    So the farmers dont wanna list on the market, how will they pay for a huge capital raising by Fonterra? The rural sector is leveraged to the max, I assume.

    I, for one was looking forward to buying some Fonterra shares in the IPO.

    Hey, average NZers should have the opportunity to participate in NZ's largest industry.
    Last edited by Dr_Who; 07-09-2009 at 01:13 PM.
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    Quote Originally Posted by Dr_Who View Post
    So the farmers dont wanna list on the market, so how will they pay for a huge capital raising by Fonterra? The rural sector is leveraged to the max, I assume.

    I, for one was looking forward to buying some Fonterra shares in the IPO.
    I never thought Fonterra would become a viable investment for a non-dairyfarmer shareholder. I couldn't see any arrangement being agreed to which didn't put a priority on value being distributed via the milk payout, with overall profitability of the company coming a distant second.

    A pity though, as the potential for profitable growth is undoubted if handled well. Brian Gaynor's recent article on the success of Irish former co-operative Kerry Dairy ( or some such name ) shows what might be possible.

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    Yes- bummer. I was really looking forward to buying some Fonterra shares and having a stake in NZs largest exporting company- still perhaps they may issues bonds?

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    Quote Originally Posted by Walfootrot View Post
    Yes- bummer. I was really looking forward to buying some Fonterra shares and having a stake in NZs largest exporting company- still perhaps they may issues bonds?
    They have issued debt instruments in the past, and were over-subscribed.

    Yes the farmers will be reluctant to give up the current structure. But why shouldn't the townies have a share too?

    Perhaps some kind of hybrid structure where there is a partial float, with the majority shareholding being held by the farmer/owners. The farmers would then be able to book equity in the floated entity, or sell their holdings a bit like what happened with AMP when it demutualised.
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    all farmers know that kiwis, investors and speculators have a habit of selling out to overseas investors.
    cant blame farmers for holding on to their own co op

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    yes I agree Neopole. the farmers have a deep and embedded mistrust of 'the money-magic'.
    And if you look at history both ancient and recent who can blame them.
    For clarity, nothing I say is advice....

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    I think the "overseas control" bogey is a bit of a red herring.

    It's simple enough to include restrictions/limitations on overseas ownership/control if that's what's worrying farmers. Their real concern is the company being run in a way that doesn't give priority to their return via the milk payout.

    Ironic that they should be finding it necessary to raise capital. Doesn't seem so long ago that they compulsorily redeemed a big chunk of retail bonds! In retrospect, that can now be seen as a signal that they didn't really have their hearts in the "value added" business, development of which would have required every spare dollar, and then some!


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    Well said Mcduffy.

    Like all your children, sooner or later you gonna let them go, especially when they get too big to handle and too costly to feed.
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

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    I don't think the ownership aspect would be crucial, but control would be the more worrying aspect for farmers - however would take a major player to get any sort of control. The chnage with SFF has a maximu of 5% voting block for non supplier shareholders.

    Farmers are already supply the likes of NZ Dairies, owned by a Russian company (Nutriek??) and Open Country are 25% owned by Olam from Singapore. Farmers will be loyal as long as Fonterra have the best payoff (or thereabouts) - it won't matter about market development or added value or whatever.

    there would have to be some sort of hybrid system to equally reward shareholders and would be a tough balance - inveriably would be tilted the way of farmers.

    Fonterra also issued some new bonds earlier this year.

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    Now that Fonterra have apparently decided against a market listing I wonder if anyone's giving any thought to a possible "corporate dairy farm" company, based perhaps on the 18 Crafar farms that are said to be on the market, and others who might welcome the chance to quit the industry.

    If, as we are lead to believe there is a strong appetite for equity investment in dairy farming, now would seem to be an opportune time to buy these assets at favourable prices.

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