Papers on Oz unit IPO proposal point to Fonterra retaining 51%
Fonterra would look to retain 51 per cent of its Australian dairy business if it opts for an initial public offering (IPO), new documents on its plans suggest.
The Weekend Herald also understands if New Zealand’s biggest business chooses not to do an IPO, the alternative to release capital from the fully integrated Australian business would be through a joint venture.
Fonterra on Thursday released a swag of reports along with its annual results and disclosure of its earnings and investment forecasts up to 2030.
A key assumption in documents about its business profile is “a reduction of 49 per cent in ownership of our Australian business in FY24”.
Other assumptions are the 100 per cent divestment of the Soprole and Prolesur businesses in Chile, and the sale of the remaining China farms and DPA Brazil in FY22. Fonterra’s Australian unit could be valued at $1 billion-$2b as a standalone business.
Fonterra chair Peter McBride has emphasised the Australian IPO is only an option and “people should be careful about jump- ing to conclusions”.
He didn’t want to comment further than saying an IPO was one option as Fonterra sought to fulfil its target of returning $1b to its 10,000-or so farmer shareholders by FY2024 through asset sales and improved earnings.
Fonterra on Thursday also released its latest thinking on a capital restructure after a review of consultation with farmershareholders.
One of the main changes to the original May proposal and preferences was the board’s decision not to buy out unit holders in the Fonterra Shareholders’ Fund and close the fund, but to keep it but cap its size.
A buy-back would cost Fonterra round $500m.
An estimated 56 per cent of units in the fund are held by farmers and ex-farmers, who have been able to exchange shares for units.
The fund has its own administrative board, and chairman John Shewan in a statement to the NZX on Thursday expressed the independent fund subcommittee’s disappointment at the decision.
Shewan’s response outlined several areas of concern, citing “poor investment decisions and a lack of earnings have resulted in disappointing . . . returns” for unit holders.
Shewan said the capital structure review announced in May had caused further value loss for unit holders.
McBride told the Weekend Herald the cap level had yet to be decided by Fonterra directors and further consultation with the fund on the cap and the capital proposal would be held, along with another round of consultation with farmer-shareholders.