Murray Goulburn is preparing its shareholders for the possibility of a partial float of the co-operative as it continues its fight to take over Warrnambool Cheese & Butter.
Murray Goulburn, Australia's biggest dairy company, is expected to make an announcement at its annual meeting in Melbourne on Friday about a potential capital raising.
It comes nine months after the company started a funding review to deliver its growth and expansion strategy.
The company is involved in a three-way global tussle for WCB. It has offered $9 cash per share, or $505 million, which Canadian dairy dynamo Saputo has matched.
MG's bid is not dependent on a float, but analysts have said the co-operative would need to pare back its gearing, which would be just below 57 per cent if it was successful in its bid for WCB.
In a letter to MG's shareholders and suppliers sent on September 2, managing director Gary Helou listed several funding options, which would be needed during the next five years to upgrade capacity and meet international demand for UHT products, infant formula and cheese.
The funding options were: increasing bank debt, selling and leasing back assets, retention of profits, raising additional equity from farmer shareholders, and/or raising equity from external investors.
Mr Helou said that MG's co-operative structure and farmer control were not being reviewed. "I want to reassure all supplier/shareholders that we are not proposing any change to it," he said.
Last week, Mr Helou used Fonterra's set-up of a non-voting shareholders' fund as an example of how to access capital. At the time of its launch in November 2012, Fonterra said the fund raised $NZ525 million.
PAC partners agribusiness analyst Paul Jensz said the partial float made sense for Murray Goulburn, which owns about 17 per cent of WCB. He said groups such as MB want to make sure they maximise the use of their co-operatives' benefits and access to external capital.
"If their peer is doing the same thing, they don't want to be at a disadvantage when and if interest rates go a certain way, or risk tolerance with equity investors changes as well."
MG's bid failed to win the support of WCB's board, which has backed Saputo's revised bid.
MG's bid hinges on approval from the Australian Competition Tribunal, which could take up to six months to reach a decision.