Intense investor interest in the Fonterra Shareholders Fund meant the units are likely to debut at a premium to their $5.50 issue price when they list on the NZX at noon tomorrow, investment sources said.

Andrew Bascand, managing director at Harbour Asset Management, said the interest in Fonterra had been unprecedented during the book-building phase, when investors put in bids for stock.

"Retail, farmer and global demand was very strong," he said in a commentary.

Morningstar analyst Nachi Moghe said he expected the units to list at a 5 or 10 per cent premium to their issue price, before settling at around $6.


"And then the market will begin to analyse the performance of the company," he told APNZ.

The units do not confer a direct, voting interest in Fonterra but their trajectory is expected to be based on the performance of the cooperative.

Interest in the units was such that brokers had to heavily scale back investor applications.

The units form an integral part of Trading Among Farmers (TAF).

There are two sides to TAF. The Fonterra Shareholders Market, which will also kick off tomorrow, will allow farmers to trade Fonterra shares exclusively among themselves.

The second part, the $525 million Fonterra Shareholders Fund, will give investors access to Fonterra's dividend flow.

A registered volume provider will facilitate trading in the farmers market but can also exchange shares for units.

Fonterra priced its units at $5.50 apiece, the top end of the range proposed in a book-build, with 42 per cent of the fund being sold to overseas investors.

The scheme is aimed at reducing Fonterra's redemption risk, when the cooperative has to pay out shareholders when they exit the sector.

Bascand said the key short term drivers of the investment and valuation would centre on Asian growth and Fonterra's ability to maintain a fast growth rate in the foodservices segment, rather than the milk price.

At $5.50, the units are expected to yield 5.5 per cent a year.

Meanwhile the NZX said it had received the approvals required under the Dairy Industry Restructuring Act, enabling the new Fonterra Shareholders' Market to come into operation.