New Zealand dairy giant Fonterra said at the weekend that a public share listing will not be part of the capital structure consultation to begin shortly with farmer shareholders.

Fonterra chairman Sir Henry van der Heyden said on Saturday (5 September) that the announcement addressed "considerable speculation" about the co-operative's capital structure review and would allow shareholders to debate the issues "without needless distraction".

"Many of our shareholders have made it clear they want to retain 100% farmer control and ownership of their co-operative," Van der Heyden said.

Under Fonterra's constitution, 75% of votes must support any change to capital structure.

"Taking a public listing off the table is a pragmatic, commonsense approach which reflects how our shareholders feel. It would be a waste of time and money to debate the merits of a public share listing when there is no prospect of securing a 75% vote," he added.

"This is the most important conversation we've had in our co-operative since we formed Fonterra in 2001. We want to have it without the distraction of misplaced speculation that clouds our discussions."

The board, with the support of the Fonterra shareholders' council, will discuss with farmers possible solutions around a three-step process that, if accepted by farmers, would take care of Fonterra's capital structure issues for the immediate future.

This is designed to address redemption risk and to secure capital for the co-operative, the company said.

At present Fonterra's shares relate to milk production and are redeemable. Therefore, at times of falling production, significant amounts of equity are lost from the balance sheet, affecting debt-to-equity ratios.

The consultation process with shareholders is expected to begin on 18 September.

Van der Heyden said that, if farmers supported the first three steps, there were a number of options not involving public listing that they could consider for any fourth step.