Fonterra Share Market Move Should Raise No Concerns, Analyst Says
Source: DairyNews.today
Fonterra's decision to move its supply share listing from a private market to the NZX Main Board should not raise any concerns for farmers, according to Forsyth Barr analyst Matt Montgomerie.
Montgomerie emphasized that trading co-operative shares on the NZX is not a new development, noting that the farmer-only ownership structure and restrictions on Fonterra Co-operative Group (FCG) shares will remain unaffected.
Fonterra explained that the move would deliver cost savings, although the company did not disclose what it had been paying NZX to operate the private market since the introduction of Trading Among Farmers in 2012. The company said that, following the successful transition to its Flexible Shareholding capital structure and the maturation of the co-operative’s trading environment, now is the right time to make the shift.
In addition to the NZX listing, Fonterra also plans to delist the Fonterra Shareholders Fund (FSF) from the Australian Stock Exchange, leaving it solely listed on the NZX.
Montgomerie noted that the price gap between FCG shares and FSF units is narrowing but is not expected to close entirely. At present, the difference stands at 90 cents. Over the past year, FCG shares have doubled in value to approximately $4.50, while FSF units have risen by 75% to $5.40. This reflects growing investor speculation that capital returns of up to $2 may follow the planned divestment of Fonterra's consumer brands and businesses.
Both FCG and FSF investors have received dividends and capital returns totaling $1.45 over the past 14 months.
Fonterra's General Manager for Capital Markets, Philip van Polanen, highlighted strong farmer participation in the FCG market, with many farmers using the tailored Sharesies app. Market makers, including brokers Craigs and Jarden, continue to support liquidity by buying and selling shares, which is essential for maintaining bid-ask levels in line with the Dairy Industry Restructuring Act.
Van Polanen also noted that annual turnover in the FCG market ranges between 60 and 90 million shares, representing about 5% of total shares issued. Most of the trading activity is driven by farm sales, with the majority of farm purchases continuing to supply the co-op.
"Since flexible shareholding was introduced, we have seen more farmer-to-farmer share market activity," Van Polanen added.
Fonterra explained that the move would deliver cost savings, although the company did not disclose what it had been paying NZX to operate the private market since the introduction of Trading Among Farmers in 2012. The company said that, following the successful transition to its Flexible Shareholding capital structure and the maturation of the co-operative’s trading environment, now is the right time to make the shift.
In addition to the NZX listing, Fonterra also plans to delist the Fonterra Shareholders Fund (FSF) from the Australian Stock Exchange, leaving it solely listed on the NZX.
Montgomerie noted that the price gap between FCG shares and FSF units is narrowing but is not expected to close entirely. At present, the difference stands at 90 cents. Over the past year, FCG shares have doubled in value to approximately $4.50, while FSF units have risen by 75% to $5.40. This reflects growing investor speculation that capital returns of up to $2 may follow the planned divestment of Fonterra's consumer brands and businesses.
Both FCG and FSF investors have received dividends and capital returns totaling $1.45 over the past 14 months.
Fonterra's General Manager for Capital Markets, Philip van Polanen, highlighted strong farmer participation in the FCG market, with many farmers using the tailored Sharesies app. Market makers, including brokers Craigs and Jarden, continue to support liquidity by buying and selling shares, which is essential for maintaining bid-ask levels in line with the Dairy Industry Restructuring Act.
Van Polanen also noted that annual turnover in the FCG market ranges between 60 and 90 million shares, representing about 5% of total shares issued. Most of the trading activity is driven by farm sales, with the majority of farm purchases continuing to supply the co-op.
"Since flexible shareholding was introduced, we have seen more farmer-to-farmer share market activity," Van Polanen added.
