Fonterra’s bankers will next Tuesday present to Sydney fund managers as they spruik the ASX listing of Mainland Group, the consumer business of New Zealand co-operative Fonterra, in a float that could value the owner of Western Star butter and Mainland cheese at up to $4 billion.
According to emails sent to fund managers, Jarden, JPMorgan and Craigs Investment Partners have asked fundies to put aside 90 minutes next Tuesday afternoon to hear from Rene Dedoncker, who is slated to become the consumer business’s chief executive.
The company is calling it a non-deal roadshow.
Sources told this column Fonterra’s IPO leg could seek to raise between $1.5 billion and $2 billion, given analysts estimate the consumer business to be worth between $3.5 billion and $4 billion – putting it at par with Virgin Australia, the other hotly anticipated IPO candidate that is yet to tee up a roadshow.
However, come bookbuild time, the valuation – and with it, the IPO size – would come down to Fonterra’s growth profile, listed comparables’ valuations and the overall health of the IPO market.
Fund managers know it’s not a high-growth name like Canva or Guzman y Gomez, and that $1 billion-plus IPOs for Kiwi companies are as rare as hen’s teeth. Sources say they wouldn’t be surprised if the raise was just $1 billion.
Dual-track
Dedoncker will be flanked by Mainland’s chief financial officer Paul Victor at the IPO meetings, and advance copies of the decks detailing the up-for-grabs business were attached with the invite. Rinse and repeat for New Zealand this week and Asia for the week starting March 24.
Mainland’s headline figures are for $NZ4.9 billion ($4.4 billion) revenue and $NZ200 million EBIT, with 41 per cent of the gross profit coming from South-East Asia, Sri Lanka and the Middle East, and the bulk from Oceania. The big question on fundies’ minds is what how much of Mainland is Fonterra willing to sell in an IPO scenario – and at what price.
You would think Dedoncker and Victor would skip the small talk with listed markets investors and get to discussing the price relatively soon, given non-binding indicative bids for the auction leg are due in about six weeks. The business is also relatively well known to fund managers given it has been prepared for a divestment in the past, including in 2021.
Fonterra seems to be running a genuine two-track process between the IPO and the auction – a deal structure used by the erstwhile owners of PEXA, StatePlus and Alinta Energy.
However, it’s been a while since bankers have wheeled it out. The last big-ticket dual-track process in Australia, SG Lottery in 2021, left a fair few investors grumpy when a softer leveraged buyout bid won over an IPO process.
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