Big yes vote on Yili sale from farmers

Faith in the farmer-cooperative business model for New Zealand dairying has taken a hit as embattled Westland dairy company farmers voted to sell their co-operative to Chinese dairy giant Yili.

The sale of 75-year-old Westland Milk Products to China now looks all but done after its 326 farmer-owners voted by nearly 94 per cent to a $588 million takeover offer from Yili.

Only 6 per cent of shareholders voted against the offer, which will see Yili pay farmers $242m or $3.41 per share cash for shares Westland’s independent adviser Grant Samuel valued at only 88c-$1.38 per share.

Yili will also take on Westland’s $342m of debt and liabilities, and has undertaken to pay Westland farmers the same price as market payout setter Fonterra for 10 years.

Westland suppliers have not received a market price for their milk for several years because of the company’s financial struggles.

Another deal sweetener is that Yili will pick up all existing milk supply for another decade in a region where most farmers have no choice of processor to supply.

If all goes to plan, Westland could be owned by Yili from August 1.

The deal still needs Government approval through the Overseas Investment Office and the tick from the High Court.

Westland chairman and major shareholder Pete Morrison said the deal would inject $75m cash into the West Coast economy by Christmas in the form of advance milk payments and because farmers would not be called on to lose 20c-40c/kilogram milk solids from their next payout to keep the company afloat. Farmers will also receive a cash lump sum for their shares. The average production farm is expected to receive around $500,000 from the Yili buyout.