KEY POINTS:
Dairy Equity, which raised $92 million in 2006 to buy shares in Fonterra, has suspended purchases because of uncertainty about the value of the securities.
Fonterra restricts its shares to New Zealand farmers supplying it milk. Tauranga-based Dairy Equity developed a contract enabling farmers to sell their shares to it while keeping their supply contract and voting rights.
Dairy Equity keeps any payout from Fonterra beyond what it pays for raw milk.
Rising milk prices "increased uncertainty over the level of the value-added component payment that Fonterra will be able to achieve this season", Dairy Equity said yesterday.
The company is suspending its investment until it is confident the value-added payment will improve. Dairy Equity owns or has acceptances for $22.1 million of Fonterra shares.
A plan announced in June to sell 50 per cent of its manager, DEL Management, to ANZ National Bank won't proceed because of the decision to suspend investing.
Dairy Equity plans to review and consider "all possible options for the company with a view to making a recommendation to shareholders" at the annual meeting in December.
- Bloomberg
