By Rebecca Howard
March 19 (BusinessDesk) - Westland Co-operative Dairy Company has signed a conditional agreement to sell the co-operative to Inner Mongolia Yili Industrial Group for $3.41 per share in a deal worth $588 million, including debt and liabilities.
The proposed transaction is through a scheme of arrangement and requires the approval of 75 percent or more of the votes of shareholders, in each interest class, who vote. It must also be approved by shareholders holding more than 50 percent of the shares eligible to be voted.
"The board believes that the proposed transaction represents the best available outcome for our shareholders, and has the unanimous support of the board. The acquisition price represents an attractive price to the Westland shares’ nominal value," said chairman Pete Morrison. Westland will seek shareholder approval for the proposed transaction at a special shareholder meeting expected to be held in early July.
According to Westland, the nominal value of Westland shares range from 70 cents to $1.50 per share. The deal is subject to the $3.41 being within or above the independent adviser's valuation range. The debt and other assumed liabilities total $342.5 million.
Under the proposed transaction shareholder farmers who are existing suppliers upon the implementation of the scheme will receive the benefit of Westland’s commitment - under the new ownership - to collect milk and pay a competitive payout of a minimum of the Fonterra farm gate milk price for 10 seasons from the season commencing August 1, 2019, Morrison said.
A Supplier Committee comprising five representatives from existing Westland suppliers and five representatives from Westland, under the new ownership, will be formed to maintain communications and transparency between existing Westland suppliers and Westland going forward.
Yili Group chief executive Jianqiu Zhang, said the offer, if accepted by shareholders, would result in an immediate cash windfall to farmer shareholders, as well as a competitive milk payout.
“We believe we are offering farmer shareholders a stronger financial future, and greater access to international markets," he said in a separate statement.
According to Morrison, the board confidentially engaged with more than 25 parties in a competitive process to seek indications of interest in a cornerstone investment in Westland or a full acquisition or merger with Westland. It then shortlisted a small number of parties to participate in detailed financial, legal and operational due diligence and to review and negotiate potential transaction documents with Westland.
The deal also requires High Court approval of the transaction, consent under the Overseas Investment Act, and completion of other customary conditions.
Yili has been in New Zealand since 2013, when it acquired Oceania, the South Canterbury-based dairy company, since that time it has invested approximately $650 million in establishing milk powder, infant formula and UHT production lines for Oceania.