27 Feb 2013

Bonus share offer by Fonterra

6:39 pm on 27 February 2013

Fonterra is to release a bonus issue of shares to its milk suppliers in a move aimed at easing farmer fears about its surging share price.

Farmers will receive a bonus issue of one extra share for every 40 they hold by 13 April.

The shares were launched at $5.50 and are now trading at more than $7.20, causing farmers to worry they will have to pay more if their milk supply increases next season.

Federated Farmers says farmers inundated directors with phone calls worried it will cost significantly more to increase production next season.

Farmers wishing to increase milk production must buy shares to supply that milk to Fonterra.

In Wednesday's share announcement, farmers get a bonus issue of one extra share for every 40 they hold by April this year.

Fonterra chairman John Wilson said farmers can use the extra bonus shares to back current or future production increases, or sell them if they wish.

Based on current production levels, he said the bonus issue means about 95% of shareholders will not need to buy extra shares next season to match any increase in milk supply.