The long-awaited debut of the Fonterra Shareholders' Fund on the NZX's main board will loom large on the business agenda this week.

The final phase of the offer - the institutional book-build, where institutions put in their bids for units in the fund - will take place early in the week.

Final pricing is expected to take place tomorrow.

The institutional phase, like the book-build for brokers which finished last week, is expected to attract intense interest before the fund debuts on the NZX on Friday.


Fonterra's issue, which will be for not less than $500 million but which will cater for $25 million in oversubscriptions, has been highly sought during the book-building stage, and the investors are unlikely to get as many units as they applied for because of scaling.

"I think there will be a bit of a rush to get through a very narrow pipeline," said one fund manager. "People will be disappointed with their allocations."

The dairy co-operative has put forward an indicative price range of $4.60 to $5.50 for units in the fund.

Fonterra's offer will be only the second such offer to appear on the NZX's main board this year.

Investment banking sources said the Fonterra offer had attracted widespread interest, domestically and from overseas, despite it being small by international standards.

It will form an integral part of the Trading Among Farmers share trading scheme, which will allow non-farm investors access to the co-operative's dividend flow but will not give fund investors voting rights.

Fonterra will put in the bulk of shares required for the Fonterra Shareholders' Fund after a muted response from its farmer members.

The dairy co-operative said farmers had taken a "wait and see" approach in the supply phase of the fund.

Fonterra said about 260 farmer shareholders had offered to sell economic rights of around 5.5 million Fonterra shares into the fund.

"It is clear that we have seen limited interest from farmers at this time," Fonterra chief executive Theo Spierings said.

"We're hearing from our farmer shareholders that a number of them are likely to wait and see how the units trade before deciding to sell economic rights of some of their shares into the fund, but many are showing confidence in Fonterra by applying to buy units," he said.

As indicated in the fund's prospectus, Fonterra will issue enough shares to achieve the $500 million minimum fund size required.

Fonterra has said it does not intend to permanently retain the resulting equity.