NEW ZEALAND – Yili group, the state-owned Chinese dairy company has entered an agreement to acquire Westland Co-operative Dairy Company, an independent co-operative dairy company in New Zealand for US$404 million.
The conditional scheme implementation agreement was signed by the board of Westland Co-operative and is subject to shareholder approval.
“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 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,” said Westland chairman Pete Morrison.
Trading as Westland Milk Products, the Hokitika based company is owned by over 429 farmer shareholders that supply milk for processing.
Formed in 1937, Westland Milk Products is the third largest independent dairy company in New Zealand and processes approximately 3% of the country’s total milk production.
Following a strategic review, the Westland 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.
It settled on Yili’s offer after engaging 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.
Yili, which is the largest dairy producer in China and Asia has embarked on a strategy to grow both its domestic and global businesses and in 2013, it acquired Oceania Dairy Group through US$214 million investment.
Speaking on the proposed transaction, 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.
“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,” said Zhang.
“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.”