Head of NZ Research at UBS, Marcus Curley, said Fonterra was having to resort to an on-market sale.
“The fact they are going to be losing money on a sale relative to their entry price doesn’t come as a huge surprise, given people can see the share price every day relative to what they bought it at.”
Fonterra chief executive Miles Hurrell said Fonterra had talked with a number of buyers about selling the entire shareholding, but had been unsuccessful.
Hurrell said the decision was part of Fonterra’s three-point plan to turn around the business.
It had carried out a strategic review of its relationship with Beingmate, which had been “disappointing”.
Firstly it brought back the distribution of infant formula brand Anmum in China under Fonterra management.
“We then ended the Darnum joint venture with Beingmate, bought back Beingmate’s share of our Darnum facility in Australia, and entered into a multi-year agreement for Beingmate to purchase ingredients from us.”
All that remained was the shareholding in Beingmate, which was now only a financial investment.
“We have talked to a number of parties regarding the potential sale of our entire stake in Beingmate, but so far have been unsuccessful in finding a buyer.
“As a result of this, we are now considering selling part of our holding and, as required by local listing rules, need to pre-announce our intention.”
Subject to demand for the shares, under the Shenzhen Stock Exchange market rules it is only possible to sell up to 1 per cent every 90 days directly on the exchange, or sell up to 2 per cent in a single block every 90 days. Trades greater than 5 per cent can be made to an individual party in an off-market transaction.
Hurrell said China remained one of Fonterra’s most important markets and it had a strong business there.
Source: Stuff