Fonterra share takeup to be unveiled today

Fonterra will reveal this afternoon how many of its 10,500 farmers have taken up its offer to buy new shares in the dairy giant.

In November nearly 90 per cent of Fonterra farmers voted in favour of allowing themselves to buy into an extra 20 per cent of the co-operative.

The move came as part of a three-stage restructuring of the business, as Fonterra said it required more capital to address risks to its balance sheet caused by farmers cashing in their redeemable shares.

The new shares would also help Fonterra's global and domestic growth.

Previously, Fonterra farmers were only able to buy one share for every kilogram of milk solids they produced.

Rather than adjusting shareholding up and down each season strictly in line with milk production, Fonterra farmers can now hold a buffer of up to 20 per cent additional "dry" shares not covered by their production.

As an incentive to hold dry shares, all shares will now be eligible for dividend payments based on Fonterra's profitability.

When the new share offer and capital raising was announced late last year, Federated Farmers chairman Lachlan McKenzie said he did not expect farmers to rush out and buy the shares straight away.

Last month he predicted half of Fonterra's farmers would not have enough money to buy any extra shares and this morning said he still thought this would be the case.

"Fifty per cent of farmers can't do it because of cash flow reasons, so it's going to be less than 50 per cent that can pick up [the shares]," he said.

McKenzie said farmers would have to prove to their bank managers that dividends on the shares would be greater than their interest bill, which would be "a tough ask" in the wake of the recession.

The fact that Fonterra had not put out a prospectus, or equivalent, when the shares were offered had also dampened farmers' enthusiasm for the shares, he said.

"We haven't got a history. If anyone is going to buy shares in a listed company ... if it's a new company you've got a prospectus coming out ... if it's an existing company you've got a history of dividends and profit figures to go on. We don't have any of that significantly for Fonterra."

However, McKenzie added that "95 per cent" of farmers supported Fonterra and wanted it to prosper.

"But to write out another cheque you need a higher level of direction."

The new shares can only be sold and redeemed by Fonterra.