KEY POINTS:
New Zealand's largest company, Fonterra, faces one of the biggest days in its history this week as the board of directors unveils plans for a new capital structure.
Speculation is building that the giant dairy co-operative will consider some form of stock market listing and a split into two classes of share.
On Thursday a satellite link-up of seven meetings nationwide will see the directors unveil their preferred choice for farmers' consideration.
The aim of the restructuring is to unlock capital to enable Fonterra to take advantage of global growth opportunities, protect against farmers deciding to cash in shares and give farmers more investment options.
Chairman Henry van der Heyden has said the co-operative would be at the heart of any options considered.
Co-operatives Satara and Livestock Improvement have previously listed on the NZAX.
Kiwifruit co-operative Satara uses a two-tier share structure, with growers retaining a 60 per cent controlling stake of non-tradeable shares based on production and the rest traded publicly.
Livestock Improvement used a more traditional co-operative model with entitlements based on use of services. Livestock's co-operative entitlements are calculated each year based on spending and are split between a traditional co-op share and an investment share - only tradeable among co-op members - issued in a ratio of 10 for one.
ABN Amro Craigs research analyst Mark Lister said a listing would be eagerly welcomed by the market.
"We'd all love to see some sort of way that the rest of us that are not dairy farmers could share in the growth of that sector," Lister said.
A listing made it far easier to raise money, he added.
"So if you're wanting to grow and you foresee the need to get more funds to do that, then listing's a very wise move and it does give you a lot of options."
However, the market had not been getting too excited about possible developments before news from the company, he said.
Fonterra Shareholders' Council chairman Blue Read said the board was right to examine the issue.
"This business is dynamic and that's why you put a board of directors in. You expect them to be keeping an eye on the future all the time and they must examine the way that they feel is best for the business."
The council had taken part in meetings with the company under a capital structure team but at the end of the day it would be the board's proposal, Read said.
"I think farmers are careful businessmen and they'll want to be convinced about a whole raft of things whatever the options are."
This week's announcement marks the start of a consultation process expected to last several months, with any eventual proposal needing 75 per cent support from voting farmers.
Dairy Farmers chairman Frank Brenmuhl said farmers were talking about the potential changes but were neither excited nor apprehensive.
"Farmers are fairly pragmatic about these things, it takes a lot to get them excited."
Farmers were taking a wait-and-see attitude and had faith in the chairman and the board who had said there would be a period for discussion.
Farmers would take a hard look at any change, although they were not concerned that a change might see them give up some control.
"That's not something that farmers have been concerned about as such because that statement's been made over and over again that the option for losing control of Fonterra is not one of the options that will be put forward," Brenmuhl said.
But if the company wanted to float an overseas interest, the board did not even need shareholder approval.
"If it's a small component of investments out there now which is not related to New Zealand, milk farmers would worry less about it."
Fonterra was formed in 2001 and its revenue last year jumped $881 million to $13.9 billion.
This season a record payout has been forecast to farmers of $6.40 a kg of milk solids.
FONTERRA CAPITAL RESTRUCTURE
* Company wants to ensure capital for growth, protect against redemption risk and give farmers more investment choice.
* Possibilities include staying a farmer-owned co-operative, two-tier share structure with external investors, a partial or full stock market float.
* Directors will present the options considered and the preferred choice at nationwide meetings on Thursday.
