Westland Milk sale process 'seriously flawed'

Damien O'Connor. Photo: ODT files
Damien O'Connor. Photo: ODT files
West Coast-Tasman MP Damien O'Connor has slammed Westland Milk Products over the proposed sale to Chinese-owned Yili, but also says shareholders needed to share the blame because they had failed to scrutinise management and directors in recent years.

Mr O'Connor said he could not intervene as Agriculture Minister, but as the electorate MP and with a family shareholding in Westland Milk, he outlined his many concerns over the sale, RNZ reported yesterday.

When the West Coast-owned co-operative decided in 2001 to go it alone, rejecting an offer to merge with Fonterra, it had $100million in the bank.

''Something has gone wrong seriously and they now have huge debt,'' Mr O'Connor said.

Farmers had been treated as ''mushrooms'' and had now been presented with just one option, when he believed there had been up to 12 offers from New Zealand and overseas.

Mr O'Connor said he did not think farmers had enough information to make an informed decision.

Confidential information packs were delivered to shareholders some weeks ago, for a vote due on July 4.

Co-operatives could fail if the shareholders did not take an active interest in what their directors and management were doing.

''I think they sit back and take for granted the decisions that are made. They're not always scrutinised in the way they would be if it was a publicly-listed company. I don't believe it's the structure [at fault], it's the individuals involved.''

The Westland Co-operative Dairy Company (trading as Westland Milk Products) had been built up by previous generations, but farmers now risked losing ownership and control.

The 10-year supply guarantee offered by Yili came with a number of qualifications that farmers should be aware of, he said. Once they had sold, farmers would not get the profits from the value added. The only way to get more money would be to do more, and produce more milk.

Selling parts of the company may have been an option for farmers but that was not put to them.

''That's why I think the process has been seriously flawed.''

The huge amount of money the sale would release would go to the banks to repay farmer debt, Mr O'Connor said.

''This is the biggest and best company West Coasters have owned forever. Losing control would be a very, very sad day.''

In a column, former Lincoln University professor of farm management and agribusiness Peter Woodford said the Westland co-operative had got itself into a ''dreadful mess'' with too much debt and a non-competitive milk price relative to other companies.

''Westland's cheap-in and cheap-out policy meant that farmers supplying new milk had to make a one-off capital contribution of only $1.50 for each additional kilo of annual milk- solids production. That was crazy. And there lay the seeds of Westland's eventual demise,'' he said.

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