Farmers will take an earnings hit of up to a cent a share depending on how many new units the company issues in its new investment fund.
The dairy giant released details today of its new $525 million fund, the first chance for non-dairy farmers to get exposure to the co-operative's performance.
One of the biggest uncertainties is how many of Fonterra's 10,500 farmers will choose to sell into the fund the economic rights to their shares.
The company has promised to make up the difference so the fund can reach its $500 million target, with possible oversubscriptions of $25 million.
Farmers are worried that big unit issues from the company will dilute their returns.
Fonterra cfo Jonathan Mason says earnings per share are estimated to be 43.6 cents if no shares are issued, and 42.5 cents if $500 million shares are issued.
Figures in Fonterra's prospectus show the forecast net profit after tax will fall $10 million, to $663 million, if no issue is required and if Fonterra issues all the shares the after-tax net profit will increase by $4 million, to $677 million.
That assumes shares are issued at the current share price of $4.52, based on an initial issue of 77 million shares, reducing to 44 million shares in July 2013.
However, the $4.52 assumption is below the bottom end of the expected offer price, which Fonterra chairman Sir Henry van der Heyden describes as a "line in the sand".
"We will not push the button on trading among farmers if the price is not above $4.60."
Looking after its friends
Fonterra has devised a way for employees, sharemilkers and current and retired shareholders to take part in the offer without having to go through brokers, called Friends of Fonterra.
The company's New Zealand and Australian employees can apply for up to $25,000, and others can apply for up to $50,000.
Fonterra shareholders who have retired after October 26, 2007, can apply under the scheme – but not if they have subsequently supplied a Fonterra competitor.
Chief executive Theo Spierings would not disclose how big the Friends of Fonterra pool could be but says the board has an idea of where it would "want to land".
Sir Henry would not say how the board arrived at its $4.60 and $5.50 unit price range, except to say it was a mixture of internal figures and external advice.
Mr Mason says the range is within usual market practice.