Jones: Fonterra can’t go way of Westland
OIO rule changes need to protect NZ sovereign economic assets from governance failures, says minister
Changes to the Overseas Investment Office rules need to protect Kiwis and their sovereign economic assets from the governance failures of farmers, says Cabinet Minister Shane Jones.
Wading into the debate over the sale of the historic Westland dairy cooperative to China, Jones said the OIO rules needed to be changed so dairy company Fonterra “does not go the way of Westland”.
Westland is a distress sale. Its farmer-owners, convinced by their farmer directors, have voted to sell to China’s Yili conglomerate, which also owns the Oceania dairy company in south Canterbury.
“Kiwis have got to ask ourselves how long before this happens to Fonterra if this level of ineptitude is so rife,” said Jones, who is Minister of Regional Economic Development and associate Finance Minister.
The OIO is under government review.
“In OIO changes concerning key economic sovereignty decisions, New Zealanders need to protect themselves from the governance failure of farmers, as evidenced on the West Coast and at Fonterra,” said Jones.
“New Zealanders need to be able to rely on the Government to ensure the OIO regime does not empower farmers to continue to sell our nation’s birthright.”
Jones was responding to advice from the Herald that a group of former Westland farmer-shareholders owed millions of dollars in shares cash caught up in the sale, would be seeking his help to escalate their issue after the OIO said it was unable to help by delaying the sale until they got their money.
The farmers, many who left Westland a year or more ago, may have to wait up to five years for their money because of a Westland constitutional edict formerly designed to prevent share redemption runs on the balance sheet. Group spokesman Pete Williams said neither the Westland
board or Yili had shown any sign of being willing to put the edict aside and pay the farmers out.
Williams said an OIO loophole had allowed up to $11 million of former shareholders’ money to help fund a foreign acquisition.
“Something needs to be done where the OIO sits relative to this loophole whereby smart lawyers can achieve the use of Kiwi money to essentially fund a foreign acquisition. It’s absolutely wrong,” he said.
Agriculture Minister Damien O’Connor agreed the OIO process around the Westland sale “raises a number of questions that need answering”.
“I, along with thousands of others on the West Coast and across New Zealand share their [the group’s] frustration with the outcome of the Westland sale,” O’Connor said.
The $588m deal now only needs a tick from the High Court, having achieved OIO approval and the support of Westland’s 400 or so farmerowners. Williams’ group is also considering legal action.
Jones said the group’s problem was “not a flash way” for Yili to start the next phase of its dairy expansion in New Zealand.
“It’s [not] a good look for Chinese investors to be using long-suffering West Coast farmers for free working capital at a time when I would’ve thought Chinese expansionists in the dairy industry want to be very careful about their social licence and reputation.”
Yili managers were unavailable for comment when the Herald called.
But Jones said Yili investors were “simply obeying the [OIO] rules”.
“I don’t want to taint them as they’ve seen an opportunity and they have inexhaustible capital.
“But I, as steward of the Provincial Growth Fund, was never approached [by Westland directors] as to whether or not we could look at restructuring and help shore up that company.
“So I think Kiwis need to ask ourselves how much of our dairy industry do we want to alienate to foreigners?
“Farmers are a curious bunch. They demand total sovereignty as to how they use their land and their rights. NZ Inc. may be aghast at this highly-funded and highly successful Chinese strategy of acquiring our essential commercial assets but I think people need to fully appreciate how quickly this is happening and is it what they want to happen?
“Obviously farmers want it . . . or they wouldn’t have voted for it.
“Should we as New Zealanders via the OIO leave such powers with the New Zealand farming community?”
Fonterra chairman John Monaghan has been approached for comment. Federated Farmers vicepresident Andrew Hoggard, a Fonterra shareholder, said plenty of companies whose directors weren’t farmers failed. Westland farmers had no option but to sell, the company was “stuffed”, he said.
Westland chairman Pete Morrison, a major shareholder, said Williams’ farmer group knew the rules when they left.
“The law is very clear. They are unsecured creditors. Yili has bought the company and all its assets and liabilities and they will pay that liability when it falls due.
“They knew the rules when they left, that they would get their money in five years. That’s still the case”.
Morrison said he didn’t know when Yili would pay the farmers. “They will pay them when it falls due, I’m sure of that. They are in better position now as unsecured creditors than they were if we’d continued to stand alone [as a co-operative].”
Williams said the Yili conglomerate did not need the farmers’ money.
“The cost to Yili is nothing. It’s fundamentally wrong that they [the dealmakers] are using our money and using the constitution against us.”
Yili offered struggling Westland farmers $3.41 a share. Independent adviser Grant Samuel valued the shares at between 88c and $1.37. Yili will pay shareholders $242m with the rest of the purchase price being assumption of Westland’s liabilities and high debt.
[The farmers] are in better position now as unsecured creditors than they were if we’d continued to stand alone [as a co-operative].
Pete Morrison, Westland chairman