Fonterra fund a sign of appetite - NZX boss

Tim Bennett. Photo / Greg Bowker

The successful launch of the Fonterra Shareholders Fund could pave the way for other listings next year, apart from those assets earmarked for partial privatisation by the Government, says NZX chief executive Tim Bennett.

Speaking after the official opening of Fonterra's $500 million milk powder plant at Darfield and the listing of the fund on Friday, Bennett said the high level of interest in the fund reflected a healthy appetite for New Zealand assets.

Fonterra executives and investment bankers, citing Financial Market Authority regulations, were giving little away about the overall level of interest in the $525 million offer, but the retail side was said to have been more than 10 times oversubscribed.

Upon debut, the Fonterra Shareholders Fund units spiked to $6.66 - a 21 per cent premium to their $5.50 issue price, and finished the day at $6.59.

"There is obviously a tremendous amount of money that people would like to invest in equities and we just don't have the products available on the market," Bennett said.

The Government's plans for the partial privatisation of its state-owned power generators have been held up by legal action, but the programme is expected to start early next year with Mighty River Power.

Asked if the Fonterra issue would pave the way for other non-state issues, Bennett said: "I think so. I would hope that it [Fonterra] was a good example of where you can have ownership or control by a set of shareholders or an owner, and still allow private capital into the business.

"Clearly there are businesses that could use more capital in New Zealand, where for some reason the shareholders do not want to sell."

Bennett said he had recently visited "tens of businesses" - many in the agricultural sector - which could have future listing aspirations.

"The real problem for New Zealand is that companies do not consider listing as an option. They consider the bank, friends and family, or consider private equity, so it's important that we put that listing option in front of them,' he said.

Bennett queried why Christchurch International Airport had last week opted to raise up to $75 million through a seven-year bond issue rather than an equity-raising route.

In broad terms, he said the investment climate in New Zealand had changed, with more and more money going into KiwiSaver.

The country's attractiveness as an investment destination, relative to other countries, had also improved.

"Somebody has turned on the light switch which says that interest rates are going to remain low for an extremely long time, and therefore if you have got a yield on the equity market of 5 to 6 per cent, depending on the sector, then it's very attractive."

Bennett conceded that the weight of investment money could push share prices and distort the fundamentals for listed entities. APNZ