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Dairy Equities takes another step towards wind-up

Thursday 25th March 2010

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Would-be Fonterra investor Dairy Equities has agreed to sell the majority of its remaining Fonterra Fair Value Shares to a consortium of investors assembled by Craigs Investment Partners.

A total of 604,000 shares are involved in the transaction, worth $1.66 million at a valuation of $2.75 per Fair Value Swap Share, 25 cents below the price advised in the last advised to the market on December 11 last year.

Assuming remaining distributions occur as planned, the company expects to return total net distributions since inception in the order of 43 cents a share, or 86% of the initial 50 cents subscribed for when DEL listed on the NZX in September 2006.

The move is one of the few remaining steps for DEL to exit its attempt to give non-Fonterra farmers exposure to the dairy cooperative's fortunes, but whose future became mired in late 2007 by Fonterra's intention at that time to list Fonterra shares on the NZX.

While that has yet to happen, DEL shareholders agreed in December 2007 to an orderly wind-up, in part because Fonterra's performance was slipping at the time, and the investment had lost its lustre.

DEL chairman Peter Jensen said the consortium also has an option to purchase the balance of DEL’s Fonterra investment, which is in a single SWAP agreement, once a legal dispute relating to that agreement is settled.

The remaining wind-up process would include "at least two separate distributions", said Jensen. "The first of these, a payment of 6.25 cents per share, will be made in April on a record date to be announced once sale proceeds have been announced.

"It is the board’s current intention to delist as soon as possible after the ex date for the April distribution," said Jensen. "A final distribution in the order of 1.5 cents per share will be made upon completion of winding up and once all affairs of the business have been concluded.”

Small numbers of DEL shares have changed hands today at 75 cents a share.

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