The Supply Offer was oversubscribed as farmers offered to sell rights to 75,223,742 shares. These shares would be valued at nearly $600 million based on the fixed share offer price of $7.92. But the volume offered by farmers was over the amount Fonterra had put aside for the supply offer, resulting in Fonterra scaling back purchases to just below 80% of the shares offered. Fonterra Chairman John Wilson said about 20 per cent of Fonterra’s farmers took advantage of the opportunity to release some of the value of their shareholding.
The value of the shares which will change hands as part of this Supply Offer is $475 million. The Supply Offer will not increase the current size of the Fonterra Shareholders’ Fund (FSF). Fonterra is purchasing the Units that arise as a result of this Supply Offer and will then redeem them for Fonterra Shares, which means that the Offer will not affect the total number of Units on issue. The transfer of Co-operative Shares by Farmer Shareholders participating in the Supply Offer, the corresponding issue of Units in the Fund, the acquisition of those Units by Fonterra and the redemption of those Units in exchange for Co-operative Shares will all occur on the same day, 30 May 2013. There are slightly more than 100 million units issued in the FSF. This share offer means that the majority of the units in the funds will now be backed by milk supply, as was originally intended.