FSF - Fonterra Shareholders Fund

[Tim nice but dim]

Congrats Seaweed - fortune favours the brave! (sometimes). I wish I'd bought more back in May last year, when they first announced the new business separation/divestment strategy. Ended up with 20k parcel at $3.70-$3.80. Very much a conviction buy/hold that the P/E mathematicians would never bother with and hence flew under the radar for a long time.

Nice surge in the SP today which should mean that the SP will settle around $7.90-$8 tomorrow ex-dividend. That's still well north of where it was only a few weeks ago. The next bump will be on 30/10 when/if (probably when) the divestment plan is ratified. What the prospect of $2 per share tax-free cash return will do to the SP is anyone's guess.

I agree, historical XD data below ...

With still some food on the table we should see share price return to XD price quite quickly following tomorrows drop (perhaps 2 months).

With the last capital return share price recovery was 9 months. That was 1/4 of what is proposed so perhaps expect at least 2 years for share price recovery following this $2.00 return.

[Tim nice but dim]

I agree, historical XD data below ...

With still some food on the table we should see share price return to XD price quite quickly following tomorrows drop (perhaps 2 months).

With the last capital return share price recovery was 9 months. That was 1/4 of what is proposed so perhaps expect at least 2 years for share price recovery following this $2.00 return.

With close today @ $8.36, that's above the the XD closing price this is only 0.5 months to recover the share price WOW!

Check the next week to see if it holds.

[LoungeLizard]

The real interesting moment will be in two weeks time when/if (probably when) the shareholders ratify the divestment strategy . If ratified, what will the stated $2 per share return of capital do to the SP? How much is already built in?

[seaweed]

The real interesting moment will be in two weeks time when/if (probably when) the shareholders ratify the divestment strategy . If ratified, what will the stated $2 per share return of capital do to the SP? How much is already built in?

good morning and good question, buy the reports and sell the news. it is 6.30am over here and still dark. LA

[Left Field]

Decision day.....

[seaweed]

Decision day.....

Yes, decision day. Going to be interesting watching the sp reaction.

[Left Field]

Yes, decision day. Going to be interesting watching the sp reaction.

Yes hard to predict....a strong vote of confidence could boost the sp.... or is a favourable decision already factored into the SP? 

Today we will see how 'well positioned' we are!

[Left Field]

88% in favour of divestment.

https://www.nzx.com/announcements/461679

"Fonterra's farmer shareholders have given the go ahead for the Co-operative to sell its global Consumer and associated businesses, Mainland Group, to Lactalis for $4.22 billion, with 88.47% of the total farmer votes cast in support of the divestment.....

....The threshold required to approve the sale was for more than 50% of the votes from those entitled to vote (based on share-backed kgMS) and who actually voted to be in favour of the proposal.
 
 Completion of the divestment remains subject to securing certain regulatory approvals and the separation of Mainland Group business from Fonterra, both of which are well underway.
 
 Subject to these steps being completed, Fonterra expects the transaction to complete in the first half of the 2026 calendar year.
 
 Fonterra is targeting a tax-free capital return of $2 per share to shareholders and unit holders, equivalent to $3.2 billion, once the sale is complete.
 
 Another shareholder vote will be required for the payment of the capital return. The process for that capital return is expected to be by way of a scheme of arrangement under Part 15 of the Companies Act 1993.
 
 The Co-op plans to provide more detail on the timing and process for the capital return in early December."

 

[LoungeLizard]

Not a big reaction from the market as yet. The SP has been surging for the last year or so, since the divestment strategy was first announced, so maybe most of it has been built in. Still, early days. A $2 tax free return might tempt the buyers in as we get closer to pay day!

[Habitz]

Not a big reaction from the market as yet. The SP has been surging for the last year or so, since the divestment strategy was first announced, so maybe most of it has been built in. Still, early days. A $2 tax free return might tempt the buyers in as we get closer to pay day!

If the capital return is priced in already which I think it is, won't the payout be adjusted off the shareprice. I haven't calculated the forecast yield then but I think it's above average

[LoungeLizard]

My guess is that the SP will probably continue to lift - $9? - as we near the actual payout date, which is sometime away yet.
AFter payout, there will definitely be a drop. Fonterra are forecasting earnings for FY26 to be 45-65c per share, which excludes the divestment. The new dividend policy is 60-80% of earnings.
They are naturally being pretty bullish about the business going forward and are aiming at earnings being restored to current levels within three years.
I think FCf is a keeper after divestment/payout but it remains to be seen how the new strategy is executed.

[Habitz]

Will an under 9 percent 8.7 to be exact, forecast div yield be enough for investors. Ie 55 cents earnings at mid point by 80 percent payout ratio and grossed up for tax credits on a 7 dollar share price post payout. It must be in the ballpark

[seaweed]

Will an under 9 percent 8.7 to be exact, forecast div yield be enough for investors. Ie 55 cents earnings at mid point by 80 percent payout ratio and grossed up for tax credits on a 7 dollar share price post payout. It must be in the ballpark

I am looking at Morningside numbers. Ignore the special $2 div pay out for a minute or two. If FSF is paying a 57c div for the year, then the YLD at $8.30 is about 6.87% and at $6.30 the YLD is at about 9.05% which to me is a good YLD compared to the bank. So looking at the mid point a sp of $7.30 the YLD is about 7.8% which is not a too bad YLD compared to the bank. So if sp drops $2 after special div to say $6.30 I would predict a lot of support for it to go back to $7 again. This is todays numbers with sp at $8.30c. If sp goes to $9 or $10 before $2 div then that's icing on the cake. IF FSF declared a real positive update on ex div day, as what SEK did on their ex div day 17/9/25, then that will also support the sp. 

[LoungeLizard]

Interesting that the SP has fallen back slightly after the divestment plan was ratified. Although I note there still needs to be another shareholder vote on the return of capital, although that should be a formality as Management has already flagged a return of $2 per share/unit.
Peculiar then that some have chosen to sell now ahead of an assured big payday in the first half of next year. Thoughts as to why?

[Left Field]

Interesting that the SP has fallen back slightly after the divestment plan was ratified. Although I note there still needs to be another shareholder vote on the return of capital, although that should be a formality as Management has already flagged a return of $2 per share/unit.
Peculiar then that some have chosen to sell now ahead of an assured big payday in the first half of next year. Thoughts as to why?

Perhaps the recent decline in dairy auction prices and associated concerns regarding Fonterra's ability to maintain margins, revenue targets etc???