THE thousands of farmer shareholders and milk suppliers who share a controlling interest in Waterford Co-op were sure of only one thing yesterday - they are facing a period of uncertainty that may end with a stark choice testing their allegiances.

They were keenly aware that if a solid proposal emerges for a link-up between Avonmore and Waterford Foods - be it an amalgamation or a takeover - it is, sure to involve a boost for both the value of their shareholdings and for milk prices.

But many of them have brothers, sisters or other relatives working in the big local plants of the company, and they know too that the history of company rationalisations almost invariably has profound repercussions on employment.

In Dungarvan, Co Waterford, the centre of Waterford Foods biggest manufacturing plant in the Republic, and also of the group's corporate headquarters, there were no obvious signs either of excitement or alarm that a mammoth merger deal might be in prospect.

Outside the offices of Waterford Foods plc, a line of Mercedes and BMWs betokened the prolonged board meeting that was taking place in private.

But nobody was talking. "It is market-sensitive," said a PR executive who had been hurriedly drafted in to handle the flood of media interest. "The Stock Exchange is monitoring the situation and will have to clear all statements."

In mid-afternoon, the plc directors were joined by board members of the co-op for a further extended meeting. They arrived in more modest vehicles, some of them coming straight from marts in other parts of the region.

"We are hoping to resolve the situation," said Mr Pat Murphy, county secretary of the IFA and board member of the co-op. "I'm going in here to make sure that Waterford Foods continues doing the job it has been doing.

Another IFA official reflected the underlying unease that the sparse news has triggered among the farming community.

"Rationalisation, as a long-term view, is positive for dairy farmers," he said. "But there are reservations. What sort of long-term job loss will be involved? And if this becomes a corporation with a two billion pound turnover, will it be concerned with the fortunes of the dairy farmer.

"Dairy farmers will be less inclined to take a boost in milk prices on face value - they have been promised that before."

The union representatives of the local workforce were even more uneasy. "Naturally, the news we heard this morning - initially on the radio I might add - was a cause for concern to our members commented Mr Tony Mansfield branch secretary of the ATGWU in Dungarvan for the last 20 years. "The general view is that rationalisation is necessary for the dairy industry. Our concern is a bit different. Our concern is for those who have given a lifetime of service to Waterford. I hope that they'll be given proper consideration - that it won't all revolve around share prices and milk prices. We certainly hope it's not being set up to decimate employment either in Waterford or Kilkenny."

The ATGWU organises some 300 of the 450 employees at the Dungarvan plant. The remainder are in craft or clerical unions. Mr Mansfield said that he had already been in contact with his counterpart in SIPTU and, along with the 10th unions, they would be co-ordinating their efforts to safeguard the interests of all the employees.

The union, and the town, have been through a similar situation before. In 1991, negotiations for a between Avonmore and Waterford dragged on for about nine months, with the workers in the dark and unsure of their fate.

Mr Mansfield still has on file the letter circulated to staff by the company which announced that those merger discussions had been terminated. It simply informed them that: "The discussions between Waterford and Avonmore were intended to provide a framework for a merger of the two companies on a 50:50 basis. It has been found that a merger on this basis would not be possible at this time."

The Dungarvan plant takes in milk supplies from an extensive catchment area, including east Cork, Kilkenny, Waterford and Wexford. The secure employment it provides is vital to the town, where over a thousand people out of a total population approaching 7,000 are registered unemployed.

The ATGWU's veteran members have lived through a long series of mergers, amalgamations and name changes which have marked the development of the Waterford giant out of small local operations.

The inexorable transition began back in the 1940s, with Dungarvan Creameries and Shandon Dairies evolving into Dungarvan Co-op, and then into Waterford Co-op, with smaller creameries being absorbed.

Farmer control was seen as diminishing after Waterford Foods plc was formed in 1988. In the present situation, farmers remain worried that their access to, and information about, corporate policy and developments may dwindle further if a mammoth merger is enacted.

Yet many progressive farmers feel that amalgamations are inevitable, according to shareholder and former board member, Mr Cyril Power. "It would have to be good for farmers - for the farmer, shareholder and the milk supplier," he conceded.

But the news, coming out of the blue, has also caused shock, and the main concern of farmers yesterday was the dearth of information. "We would have to be very careful about it, whether it's an amalgamation or a takeover," said Mr Power. "It won't be an easy one to sell."

As the company's deliberations continued behind closed doors, both farmers and workers shared a high degree of caution concerning the possible implications of the Avonmore approach. The community at large in Dungarvan and the county could only wait and hope that the interests of both can be protected in whatever emerges from the boardrooms.