* Board's preferred option will reduce mininum requirement
* Suspends conversion of farmer shares into the market
* Fonterra shares to remain suspended until Friday
May 6 (Reuters) - New Zealand dairy giant Fonterra
on Thursday laid out a range of options to overhaul its
capital structure and allow farmers easier entry to the
cooperative as it seeks to firm up its financial future.
The Fonterra board said its preferred option was a structure
that would reduce the number of shares a farmer must hold and
either remove or cap the growth of the listed Fonterra
Shareholders Fund, which is open to non-farmer investors.
Among the other options for the world's top dairy exporter
were dual share structures to allow outside involvement,
splitting the co-op between supply and processing businesses,
and different classes of shares.
"The Co-op's future financial sustainability relies heavily
on our ability to maintain a sustainable New Zealand milk supply
and protect farmer ownership and control," Chairman Peter
McBride said in a statement.
Dairy farming is crucial to both New Zealand's economy and
politics, and the Auckland-based company said changes are needed
to guard against potential milk supply declines due to climate
change, regulation and alternative land uses.
Fonterra shares were suspended until Friday and the size of
the Fund will be capped until November to give its more than
10,000 farmer shareholders time to discuss the options.
Under the board's preferred option, the minimum requirement
for farmer owners would drop to one share for every four
kilograms of milk solids (kgMS) they supply, from the current
one share to one kilogram ratio.
"This would make it easier for new farmers to join the Co-op
and give more flexibility to existing farmers who may want to
free up capital or who are working through succession," McBride
"A key outcome of this change is that shares would be bought
and sold between farmers in a farmer-only market."
Under the current structure, farmers trade their shares on a
separate platform, the Fonterra Shareholders' Market, and can
convert their holdings into shares on the listed Fund. That
conversion ability will be suspended until November.
McBride said the company is "open-minded about adjusting"
its preferred plan "based on farmer feedback on any of the
He noted the preferred changes could impact the share price
and reduce liquidity in the market.
(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by
Devika Syamnath and Jane Wardell)