Investors pile into Goodman Fielder

Graeme Hart's Burns Philp has elected to sell the maximum number of shares in Goodman Fielder after demand for the shortly-to-be-floated transtasman food giant's stock exceeded expectations.

Burns Philp, 54 per cent owned by Hart, will this morning disclose it will hold just 20 per cent of Goodman, which it is spinning on to the New Zealand and Australian stock exchanges, sources close to the deal say.

It had said in the float prospectus it would keep between 20 per cent and 40 per cent of the shares.

The sources said Goodman's shares would be sold to investors at A$2 a share, giving it a market value of A$2.65 billion. This compares with the range of A$1.85 to A$2 set out in the prospectus.

Gross proceeds from the float will amount to as much as A$2.12 billion.

The banks leading the offer, Credit Suisse First Boston, Macquarie Bank and UBS, yesterday closed the offer to institutional shareholders four hours early. Sources said demand at A$2 was sufficient to sell twice the available shares.

The high price and demand should ensure a strong start to trading.

The shares are due to trade in Australia and New Zealand on a conditional basis next week.

Unconditional trading is due to start on December 22 in New Zealand and December 28 in Australia.

Observers say the high price may reflect demand from funds outside New Zealand and Australia.

Since the float's launch last month, the banks have marketed the shares on four continents to as many as 200 separate institutions. More than 60,000 prospectuses and investment statements have been downloaded from the Goodman website.

"There has been good demand for the shares," a source said.

The price is also in stark contrast to talk from New Zealand investors as Hart launched the float of the company, which owns the Meadow Fresh, Tararua, Molenberg, and Kiwi bacon brands in New Zealand.

Several said the price was too high as most of the company's brands were mature and low-growth exposure.

Its strong reliance on staple products such as bread and milk made the company vulnerable to supermarkets increasing sales of their own brands. Supermarkets in New Zealand do not brand as many products as their counterparts overseas.

The lukewarm reception infuriated Hart. He told the Business Herald local fund managers sceptical about the Goodman float were "ill-informed".

Goodman would offer an investment proposition that was scarce in New Zealand - secure and stable long-term earnings, which should be a staple of most portfolios.

However, Tower New Zealand equities manager Wayne Stechman is sticking to his guns.

"The price is a bit high for us. There is a potential for it to list quite strongly. But we believe other things offer better value."

Burns Philp shares were last night trading up A3c at A$1.13.