Yili takes ownership of Westland Milk

Westland Milk Products' factory in Hokitika. PHOTO: SUPPLIED
Westland Milk Products' factory in Hokitika. PHOTO: SUPPLIED
Chinese interests yesterday took ownership of Westland Milk Products - the cash cow of the West Coast economy for the past 82 years.

The formalisation of the $588million sale to Inner Mongolia Yili Industrial Group (Yili) - quarter owned by the Chinese Government - was announced last night.

Westland's 400 farmer shareholders will immediately be paid $3.41 per share, for a total of $246million.

The rest of the purchase will cover the debts and liabilities of the former Hokitika-based co-operative, which is now defunct.

Yili representatives were expected to travel today to the headquarters and factory in Hokitika.

Speaking at an event in Auckland last night to announce the finalisation of the transaction, Yili Group chief executive Mr Jianqiu Zhang said the acquisition was a significant breakthrough in Yili's global expansion.

The transaction followed Yili chairman Pan Gang's concept of constructing a "healthy global ecosystem" in the construction of `Yili's dairy Silk Road'," he said.

Yili had committed to paying competitive farm-gate prices at Oceania and now at Westland to ensure a continual supply to meet rising global demand for its products, he said.

After several cash-strapped dairy seasons, the flow-on effect to the economy beyond bank debt repayment and settling long-term farm supply debts, is not expected to translate into a huge spend-up on the West Coast.

Barrytown shareholder and farm consultant Richard Reynolds said those who thought the sale would result in a large-scale flow of cash into the economy were "dreaming".

"The vast majority of the money has been taken back by banks to repay debt. It will provide certainty to the suppliers, who've had some unpaid accounts over an extended period of time. That will be the `boost' to the economy," Mr Reynolds said.

"Yes, some farmers will have a whole pile of cash in the bank to go and do something with, but they're the ones that didn't have much debt in the first place."

Since 2013, Yili has invested $650million in its purchase of the Oceania dairy company in South Canterbury. From an initial 76 staff, it now employs 318 in Waimate.

Westland's board, in announcing the deal, said Yili could be expected to similarly invest or maintain the Hokitika plant.

Mr Reynolds said the potential for "a huge effect" on the Hokitika economy in the short term through possible new construction would be interesting to see, but a boom was just that.

"It will be obviously interesting for Hokitika and I don't think they understand the ups and downs yet."

Meanwhile, Westland farmers received notification this week of their final season's payout from the co-operative.

Cape Foulwind farmer Johno O'Connor, a trenchant critic of the Yili deal, said the final payout of about $5.80 was again "pretty poor" but in line with what the board had predicted.

He said there was no question "there is going to be a lot of relief" but the sale represented "a very short-term gain", he said.

South Westland farmer and former farm real-estate agent Dave Nolan said it would immediately restore confidence.

"That guarantees there is a viable payment in front of everyone now. I think the benefits will look a bit more promising to fund West Coast farming now."

However, it was a one-off chance for farmers to reduce their debt.

"It's virtually like winning Lotto. That doesn't happen to many people in their lifetime of dairy farming in Westland. This is the best thing that is happening." - Greymouth Star/Additional reporting Sally Rae

 

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