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Dairy Equity Makes Positive Entry to the NZSX

For Immediate Release
14 September 2006

Dairy Equity Makes Positive Entry to the NZSX

Dairy Equity Limited (DEL) debuted on NZSX today and late morning was trading at $0.52 per share on light volumes.

The Company raised $92m in its initial public offering which closed last Friday and will use the offer proceeds to invest in purchasing the beneficial ownership of Fonterra Fair Value Shares from dairy farmers through agreements known as SWAPs.

At a listing ceremony in Tauranga this morning, DEL Chairman, Peter Jensen, said that he considered that, from a farmer’s point of view, SWAPs were a significant adjunct to Fonterra’s co-operative structure and that from an investor’s viewpoint, the Company’s timing in coming to market could not be better.

“Farmers will soon be coming out of their busiest time of the year and will be starting to make plans for the following season. To the extent that these plans require capital, SWAPs provide them with an attractive new alternative.”

“At the same time, changes that Fonterra is making to separate the payments it makes for raw milk and the profits it makes from adding value to raw milk, make it both easier for farmers to see the returns they are getting from their respective investments in farming and Fonterra and make SWAPs simpler.”

“Fonterra Fair Value Shares have performed well since 2001 when Fonterra was formed, and we believe they will continue to perform well. Certainly Fonterra acknowledge the potential for increases in value added returns - essentially the company’s dividend – and they are under pressure from farmers to realise these gains.”

Mr Jensen said that the decision to enter into a SWAP agreement would be a big one for farmers, akin to buying or selling property, and accordingly, DEL expected an orderly uptake of SWAPs, increasing towards the end of the farming season in May when most farms and farm businesses change hands.


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