On the face of it, it’s a no-brainer. Weighed down with debt, Westland Milk, based in Hokitika is financially on its knees. Riding to its rescue, Chinese dairy giant Yili has come in with a $588m buyout deal which will yield $3.41 a share to the co-op’s farmer shareholders, and, as well, absorb Westland’s debt and liabilities.
According to Westland, the nominal value of its shares has ranged from 70c to $1.50 per share. For the average-sized Westland farm, the share offer translates to about half a million dollars cash.
The offer looks even more attractive since Westland had to cut its milk payout forecast, while other companies’ forecasts are rising. Westland, which has grown out of the West Coast’s 150-year dairy heritage, hasn’t paid a competitive milk price for several years.
The conditional deal comes with extra sweeteners. Yili has committed to collect all milk supply. It will also pay a competitive price of at least as much as the Fonterra farmgate milk price for 10 years.
But why would Yili go that distance? Continue reading “Yili bid for Westland Milk raises questions about dairy co-operatives – and Fonterra’s ownership”