Fonterra - How much will it raise?
Wednesday, December 9, 2009 Fonterra’s capital raising will be a major test of farmers support for the co-operative.
The company is effectively having a one for five issue at $4.52 a share as farmer shareholders may purchase up to 120% of their current entitlement. Thus the capital raising has the potential to bring in $1,162 million based on the co-operative’s current capital of 1,285 million shares.
In the first eleven months of the year NZX listed companies raised a total of $3,170 million of new equity but a large percentage of this was contributed by offshore and institutional investors.
Silver Fern Farms raised only $22.2 million, compared with its target of $128 million, and those shares are now trading at a 41% discount (after adjusting for a 1:4 bonus issue) to the issue price on the Unlisted share trading facility.
Fonterra will be doing well if it raises $400 million or approximately one/third of the potential $1,162 million.
If the farmer uptake is low then the company will have to look to other sources for equity capital.
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