Yili set to buy NZ’s Westland for $404m

By Jim Cornall contact

- Last updated on GMT

The sale of Westland to Yili is subject to shareholder and High Court approval. Pictured: Westland's Rolleston plant.
The sale of Westland to Yili is subject to shareholder and High Court approval. Pictured: Westland's Rolleston plant.

Related tags: Dairy, New zealand, China, Yili

The board of New Zealand’s Westland Co-operative Dairy Company Limited has signed a conditional scheme implementation agreement to sell the West Coast dairy cooperative to Hongkong Jingang Trade Holding Co., Limited (Jingang), a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (Yili) for NZ$3.41 (US$2.34) per share, for a total of NZ$588m (US$404m).

Westland chairman Pete Morrison said, “The board believes that the proposed transaction represents the best available outcome for our shareholders, and has the unanimous support of the board.  The acquisition price represents an attractive price to the Westland shares’ nominal value.  Westland will seek shareholder approval for the proposed transaction at a special shareholder meeting which is expected to be held in early July 2019.

“Under the proposed transaction our shareholder farmers who are existing suppliers upon the implementation of the scheme will receive the benefit of Westland’s (under the new ownership) commitment (which is guaranteed by Jingang) to collect milk and pay a competitive payout of a minimum of the Fonterra Farm Gate Milk Price for 10 seasons from the season commencing 1 August 2019. 

“A Supplier Committee comprising five representatives from existing Westland suppliers and five representatives from Westland (under the new ownership) will be formed to maintain communications and transparency between existing Westland suppliers and Westland going forward.”

Yili statement

Yili is the largest dairy producer in China and Asia and has a strategy to grow both its domestic and global businesses. Yili acquired Oceania Dairy Limited in 2013 and since that time it has invested 3bn RMB (approximately US$446m) in establishing milk powder, infant formula and UHT production lines for Oceania. 

CEO of the Yili Group, Jianqiu Zhang, said the offer, if accepted by shareholders, would result in an immediate cash windfall to farmer shareholders, as well as a competitive milk payout.

Westland and Yili would also be able to share the expertise each entity has developed over many years in the industry, which will lead to increased innovation, Zhang added.

“The Yili Group sees our offer to Westland farmer shareholders as very much a partnership arrangement,”​ he said.

“We believe we are offering farmer shareholders a stronger financial future, and greater access to international markets.  In return, we are asking to become the custodians of one of New Zealand’s most trusted brands – Westland Milk – with all the knowledge, history and expertise that comes along with that.”

Zhang said Yili had already demonstrated its commitment to local dairy farmers and its determination to be a good corporate partner with New Zealand dairy farmers.

“At our Oceania processing plant at Glenavy, we have increased the average price to local dairy farmers because we believe that supporting our farmers and their families is the best way to achieve our business goals. This proven track record is what Westland farmer shareholders and suppliers can expect from us if they accept our offer.

“Yili believes it has made the best offer to farmer shareholders, and has backed that up by offering a very competitive milk payout. We are very hopeful that the farmer shareholders will support our offer, and that we can work together for a strong and secure future for Westland Milk.”

Strategic review

The proposed transaction follows a strategic review conducted by the Westland board. At the conclusion of the review, the board initiated Project Horizon – a process to explore future capital and ownership options to provide a long-term solution for shareholder farmers following Westland’s inability to deliver a competitive milk payout in recent years. 

 The board confidentially engaged with more than 25 parties in a competitive process to seek indications of interest in a cornerstone investment in Westland or a full acquisition or merger with Westland.   The board shortlisted a small number of parties to participate in detailed financial, legal and operational due diligence and to review and negotiate potential transaction documents with Westland, the third biggest dairy producer in New Zealand.

Conditions

Morrison said shareholders have been advised of the proposal and the board’s recommendation. 

 “A detailed shareholder booklet containing information relating to the proposed transaction, the Independent Adviser’s report, the reasons for the director’s unanimous recommendation and shareholder meeting information is currently expected to be provided to our shareholders in mid June 2019,”​ he added. 

“We will also hold farmer consultation meetings to discuss the proposed transaction and information provided to date. We will also brief staff, customers and key stakeholders on the deal​.”

The proposed transaction will be by way of a scheme of arrangement and requires the approval of 75% or more of the votes of shareholders (in each interest class) who vote; and more than 50% of the votes of all shareholders entitled to vote (whether or not actually voted).

 The proposed transaction also requires High Court approval of the transaction in accordance with section 236 of the New Zealand Companies Act, consent under the Overseas Investment Act, and completion of other customary conditions.

Related topics: Business, Supply chain, Oceania, Dairy

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