25 Jun 2019

Westland Milk Products sale process seriously flawed - minister

11:20 am on 25 June 2019

The board of New Zealand's second largest dairy co-op has been criticised by the Agriculture Minister for urging farmer-shareholders to give up their ownership in a flawed process.

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Photo: Supplied / Westland Milk Products

Westland Milk Products is under offer from China's Yili dairy group for $588 million.

The sale has been signed off by the company's board and now needs shareholder approval. A vote is due to take place in Greymouth on 4 July.

Last week Westland Milk held six meetings to discuss the proposal with the approximately 350 farmers that make up the co-operative.

Richard Reynolds, a shareholder of 12 years, said many farmers were struggling with the decision but they could not run viable businesses with the poor milk payouts the company had delivered in recent years.

"I think all farmers are conflicted in their emotions. There are not many that want to leave a co-op because they don't believe in co-ops, they just want to have their own businesses to be financially viable, and Westland Co-op has failed its farmers."

Mr Reynolds said the board had handled the sale proposal poorly, by failing to take farmers with them on the journey and not explaining what alternative options were to selling to Yili.

Farmer-shareholder James O'Connor said Westland Milk had been created for the benefit of the West Coast region and he did not want to see the co-op lost to foreign ownership.

"We would have liked to have seen other proposals put forward that gave us the chance to keep our ownership and keep a financially viable operation," he said.

Agriculture Minister and West Coast MP Damien O'Connor described the board's handling of the proposal as "seriously flawed" and said there had been mismanagement and the co-operative now had huge debt.

"The unfortunate thing is the very directors and managers that have carried this company to the point it is now are directing it on the sale process.

"I think the farmers have been treated as mushrooms - they haven't been given information and they've ultimately been given one deal, or one option, rather than the status quo when there were a number - we believe up to 12 offers of different proposals coming from New Zealand and around the world," he told Morning Report.

Mr O'Connor said as minister he could not intervene, but as the West Coast MP he had expressed his concern to board chairman Pete Morrison.

"The farmers will ultimately make this call, but I don't think they've had enough information to make a balanced call on what other alternatives there are.

"The process has been seriously flawed and I did say directly to the chairman he is lucky that I am not a shareholder because I'd certainly be asking for more accountability than the farmers have so far," Mr O'Connor said.

In a statement, Mr Morrison said the board had provided farmer-shareholders with a detailed 248-page booklet on the proposal and held special meetings with them.

In addition, he said, an independent valuer's report and valuation were provided to shareholders.

Mr Morrison added the board had consistently said it would bring only one option to shareholders if there was an option that it believed was worthy of that.

He said the board believed the proposed sale was the best available outcome for shareholders.

"It is important to note that no superior proposal has been received by the board since announcing the Scheme of Arrangement in March," the statement said.

Mr Morrison said farmer shareholders were told what would need to happen if there was a no vote, covering the board's expectations on staff retentions, advance payment adjustments and the possibility of the company having to undertake significant asset sales.

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