KEY POINTS:
Investors in Dairy Equity may be asked whether they want to wind up the company at its first annual meeting now that Fonterra has revealed its float plans. Dairy Equity listed on the stock exchange in September last year in a bid to give the public a chance to gain exposure to Fonterra - New Zealand's biggest company which is owned privately by dairy farmers through a co-operative.
The investment company has been able to gain exposure by purchasing the rights to the value added portion of farmers' fair value shares.
But the proposal by Fonterra to keep its farmer co-operative but shift all its assets, liabilities and operations into a second company which could then list on the stock exchange has potentially made Dairy Equity redundant.
If Fonterra lists in 2010, investors would be able to get direct exposure to its shares either through the 20 per cent proposed initial public offer or up to 35 per cent of shares which would be tradeable on the exchange.
It would no longer make sense for investors to go through Dairy Equity in its current form because they would be paying a management fee to the company on top of the Fonterra share price.
Dairy Equity director Peter Jensen said the company was still digesting the news and would be discussing its options at its annual general meeting on December 11.
"Obviously we have had a bit of a look at it - it is a proposal in principle only at this stage.
"If any major listing does occur, 2010 is about the earliest that will come about. We will certainly be having a look at what the role of company, if any, is and talking about it with our shareholders."
The Business Herald understands there may be a motion brought to the meeting to wind down the company but Jensen said he could not comment on the official business of the meeting at this stage as the agenda had yet to be sent out to investors.
It is due to go out next week.
A decision on what will be done with the rights to the Fonterra fair value shares will also have to be made.
Dairy diary
* September 2006: Dairy Equity lists, raising $92.2 million with $1 shares. Investors only have to pay 50c a share at this stage.
* May 2007: Fonterra announces cut in value added portion of payout from 59c a kg to 20c a kg from June.
* June: Dairy Equity announces that it will sell 50 per cent of its management rights to the ANZ/National Bank but deal falls over.
* August: The company suspends investing in fair value shares. By now it has invested $21.3 million in shares with 25 individual farmers. At the same time it announces it will buy back up to 5 per cent of shares to boost asset value of the share price which has fallen below the initial 50c.
* October: Announces full year profits after tax of $1.281 million.
* Thursday: Fonterra announces stock exchange plans.
* Yesterday: Dairy Equity shareholders receive dividend payment of 1.31c a share.
* December 11: Dairy Equity annual general meeting.
