Fonterra cash hailed as 'investment udders'

Federated Farmers believes the extra $271 million that Fonterra's farmer-shareholders have pumped into the co-operative will become investment "udders" for more than $500 million of acquisitions.

Fonterra said on Monday that it had raised $270.7 million from its farmer-shareholders after they were given the opportunity to adjust their shareholdings up or down, to anywhere between 100 and 120 per cent of their current or expected production, at a price of $4.52 a share.

Federated Farmers dairy chairman Lachlan McKenzie said yesterday that in "less than stellar economic times" a third of Fonterra's shareholders had "shared up".

"The $271 million raised will become udders containing over half a billion dollars when bank facilities are leveraged off it. That's a sizeable amount from which to look at acquisitions that will add value to the co-operative's financial performance," he said.

"The federation now wants to see the co-operative develop a retentions policy that will build on this war chest. While there's been much uninformed comment on Fonterra's debt, the co-operative's debt-to-debt plus equity ratio trajectory is tracking back to board guidelines of 45-55 per cent. This ratio means debt is not the issue but having equity to seize opportunities is."

McKenzie said the federation estimated at least 50 per cent of farmers did not have the ability to buy shares, with banks tightening up lending and dry conditions affecting farm budgets.

Yet the amount Fonterra raised - in a sharemarket context - would have been second only to the $450 million dual float of retailer Kathmandu on the NZX and ASX last year.

- NZPA