Capital Markets: NZ's strategic edge in a tumultuous global market

NZ Herald

13-05-2025

New Zealand capped off 2024 with an 11.4% gain in the NZX 50 Index, demonstrating improved investor sentiment as inflation cooled and interest rates eased. Secondary market activity saw material uplifts, with investors supportive of growth pipelines and balance sheet recapitalisations of large, established New Zealand assets; more than $5 billion has been raised via follow-on offerings over the past 18 months.
Leading many of these processes, Jarden has been part of the shift in how New Zealand companies approach capital raising; most notably, through the use of ANREOs (Accelerated Non-Renounceable Entitlement Offers) in the New Zealand market.
First employed under the new NZX Listing Rules for Heartland Group's $210 million raise last year, ANREOs enable tighter pricing compared to a renounceable raising structure, a faster execution timetable and more certainty for existing shareholders subscribing for additional shares at a fixed price. Fletcher Building's September 2024 $700m and Ryman Healthcare's February 2025 $1b raises – both led by Jarden – incorporated ANREO components following Heartland's positive market reception.
The growing use of ANREOs brings New Zealand into closer alignment with Australian market norms, with recent activity reflecting a maturing attitude and understanding that the right balance of structural innovation, pricing and fairness can drive better overall shareholder outcomes.
This holds true both during and following equity raise execution. Fletcher Building's 2024 equity raising delivered strong aftermarket performance, achieving a two-week return of 15% relative to its theoretical ex-rights price (TERP), outperforming the -2.5% median of recent New Zealand Accelerated Renounceable Entitlement Offer (AREO) structures the market was more familiar with. Retail investors were better off under the ANREO structure and received an overall value accretion (even if they didn't participate), given the potential value of rights in an AREO offer implied by precedents was likely outweighed by trading performance.
Recent secondary market activity has also evidenced a strong appetite for quality growth investment propositions. Auckland Airport's $1.4 billion equity raise last year, the largest follow-on offer in NZX history, was project-linked, supporting the construction of a new terminal as part of a $6.6b capital expenditure programme. Strong investor demand reflected the confidence the market has in Auckland Airport's long-term strategy.
The trend of NZX/ASX dual listings continues with Ryman Healthcare announcing alongside its recent equity raise that it is pursuing a secondary listing on the ASX, geared towards enhancing attractiveness to offshore capital and liquidity. This trend is particularly relevant for companies in sectors where Transtasman investor familiarity is high.
Future New Zealand outlook
Although the Reserve Bank cut the Official Cash Rate by 200 basis points from 5.5% in August 2024 to 3.5% on April 9, President Donald Trump's protectionist rhetoric and tariff disruptions have brought significant, fresh volatility to capital markets; the US market reached a five-year high in volatility (per the VIX Index) in early April, and the S&P 500 is down ~4.0% year to date. Following suit, the NZX 50 is down ~4.6% year to date.
Global uncertainty has catalysed a focus on defensive assets and execution capability, meaning investors will look to transfer capital from globally exposed sectors into what are perceived as 'safe haven' geographies. In this context, New Zealand, with its relative political stability and robust legal framework, becomes more attractive to offshore capital.
This outlook is coupled with an expectation that deal momentum will improve in 2025.
Private equity exits were down 50% in 2024, stretching holding periods beyond five years and increasing the pressure on private equity firms to recycle capital.
Also observed are emerging valuation gaps between public and private markets, leading to private equity sponsors directing dry powder towards listed companies with stable cashflow profiles and under-levered balance sheets. At the same time, local corporates have become open to strategic M&A – either to divest non-core assets or consolidate in sectors facing structural headwinds. The proposed divestment of Fonterra's consumer brands business (Mainland) is an example of this trend playing out locally and globally.
IPO-specific future outlook
New listings have remained scarce, with no major NZX IPOs since 2023 – higher market volatility and interest rates stalled most post-Covid IPO ambitions. Heightened investor selectivity and global macro uncertainty continues to weigh on the risk appetite of investors in considering new listings, which directly affects the valuations private shareholders can achieve.
While the IPO window may be limited for smaller growth assets with a more speculative outlook, large and well-established businesses in mature markets, such as in the case of the Fonterra's Mainland divestment, remain strong candidates for IPOs.
ASX sentiment supports this thesis, with predominantly large growth businesses, such as the IPOs of Digico and Guzman y Gomez, successfully listing in 2024. Helping to improve New Zealand's future IPO outlook are forthcoming regulatory changes, including amendments to prospective forecast information disclosure and lodgement requirements. These changes will reduce costs, lower friction for potential issuers and improve execution certainty, increasing IPO accessibility.
An optimistic second half
With both supply and demand-side drivers of M&A activity elevated, New Zealand capital markets are poised for continued momentum despite global volatility. Our pick is a continuing trend of secondary issuances using the ANREO structure, IPOs of high-quality assets in the second half of 2025 and calendar year 2026, as well as an inflow of foreign capital interested in New Zealand 'safe haven' opportunities. All in all, a positive outlook.