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March 18, 2019

New Zealand’s Westland Dairy to be sold to Yili subsidiary

Westland Dairy, New Zealand's second-largest dairy cooperative, announced it has signed a conditional agreement for its sale.

By Leonie Barrie

Westland Dairy, New Zealand’s second-largest dairy cooperative, has signed a conditional agreement for its sale to Hong Kong Jingang Trade Holding Co., a wholly-owned subsidiary of China’s largest dairy group Yili.

Westland, which has been considering a sale of the business alongside other options following a strategic review last July, said a deal has been agreed for NZD588m (US$403.7m).

Yili, or Inner Mongolia Yili Industrial Group to give it its full name, has been in New Zealand since 2013, when it acquired Oceania, the South Canterbury-based dairy company. Since that time it has invested heavily in establishing milk powder, infant formula and UHT production lines for the business.

Speaking about its proposed acquisition of Westland, the New Zealand co-op’s 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.”

Westland’s aforementioned strategic review 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.   Today (18 March), Morrison said: “Under the proposed transaction our shareholder farmers who are existing suppliers upon the implementation of the scheme will receive the benefit of Westland’s commitment  to collect milk and pay a competitive payout of a minimum of the Fonterra Farm Gate Milk Price for ten seasons from the season commencing 1 August, 2019.”

In December, Westland said it had drawn “indicative proposals” from more than 25 parties following its review.

In January, Canadian dairy business Saputo was said to be eyeing Westland’s assets.

Today Westland said its board confidentially engaged with the 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 then 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.   Westland’s proposed acquisition by Yili requires the approval of 75% or more of the votes of shareholders, and more than 50% of the votes of all shareholders entitled to vote.   It also requires high court approval.

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