KEY POINTS:
Fonterra will lay out the options for the company's future to its farmer shareholders at noon today, but a decision on what lies ahead for New Zealand's largest company is likely to be a long time off.
The dairy co-operative is widely expected to set down at least three options on ways to move towards a new capital structure, and to indicate its preference for at least one option.
Federated Farmers chairman Charlie Pedersen said he would like to see farmers given a year or two to digest the proposals.
"It's a very big decision for shareholders, many of whom have held on to their farms for generations. It's not a decision to be hurried."
Pedersen said he expected the options to sketch a move away from a co-operative in the purest sense and involve some sort of public listing.
But he said many farmers were comfortable with the status quo.
"No one enters farming on a whim. It's a very long-term business. It will take some convincing for them to see that any change is needed."
Former Dairy Board veteran Neville Martin said past experience showed how hard it was to convince farmers to change.
He was with the company when it changed from the Dairy Board into Fonterra and says the deal almost fell over at the last post because 75 per cent of the vote was needed, and in certain areas it was pretty close.
"There were a number of reservations, and it was not until they had been acknowledged that the tick was given. There will be reservations here, too."
Dairy industry commentator Tony Baldwin said the two-share option that has been touted was not one he would recommend.
Baldwin said controlling the company was one of the biggest priorities for farmers.
A particular issue was how to separate the milk price and dividend price to ensure farmers did not miss out on the proceeds.
"Fonterra needs to be very clear about how it will set the milk price."
A former Fonterra executive, who did not wish to be named, agreed it was unlikely farmers would welcome change and predicted today's proposal would just be the first step in a longer negotiating phase.
"It is tactically savvy for the board to propose a more extreme option at this stage so that the debate will be moved along."
* THE LIKELY CHOICES
1: Maintain the company as a co-operative and list part of the company on the stock exchange with one class of shares. This model was successfully undertaken by Irish dairy co-operative Kerry 10 years ago.
2: Spin off a subsidiary and list it on the stock exchange with Fonterra continuing to hold the major stake in the subsidiary.
3: Float the company with two classes of shares, one to be owned by farmers and the other for general investment. This model is used by Live Stock Improvement and was used by Air New Zealand.
