Yili’s offer of $588 million, or $3.41 a share, would return the average Westland farmer around $480,000. Although supported by the Westland board, it will need the support of 50% of all eligible voters, and 75% of votes cast, at a closed meeting of shareholders in Greymouth on July 4.
Southern Pastures says it will abstain because it wants to allow greater weight to votes from West Coast shareholders whose livelihoods will be impacted by any deal.
Prem Maan, executive chairman of Southern Pastures, said the decision was the result of careful deliberation.
“Our Westland supplying farms are situated in Canterbury, and as such we are in the fortunate position of having options for who we supply.
“Many of our fellow shareholders in Westland aren’t so well placed. So, we believe we have a moral obligation to leave the critical decision on whether the offer should be accepted or not to those Westland shareholders on the West Coast who have, and will have, no other supply options.”
Maan said Southern Pastures felt that Yili had made a fair offer and Southern Pastures would consider working with Yili if they were successful.
“We will, however, be sad to see the demise of the cooperative if that were to happen. We are strongly committed to the co-operative model and, in fact, joined Westland and formed our joint venture, New Zealand Grass Fed
Milk Products LP, with it because it was a farmer owned co-operative.”
Southern Pastures says butter produced by that joint venture is currently a finalist in the Best Butter/Dairy Spread category in this year’s World Dairy Innovation Awards.
Owned primarily by European ethical pension fund investors, Southern Pastures is the largest institutional farming fund in New Zealand. It also owns 50% of Lewis Road Creamery. Its nine Canterbury farms produce more than 4 million kgMS/year and have supplied Westland since the start of the 2018/19 season.
Board defends bonus offers
Westland board chairman Pete Morrison is defending bonus payments to chief executive Toni Brendish and other top executives, which have been criticised as a conflict of interest.
Brendish is reportedly in for $680,000, and others would get amounts of up to $360,000 if the deal goes through.
In a statement, Morrison said the retention and incentive payments were put in place to cover the whole of Project Horizon – the 12-month process which sought investment partners for Westland and which eventually came up with the Yili deal.
Morrison said the payments only relate to senior executives. No incentives were offered to board members.
He said a driving goal was retaining key personnel through a process that could result in significant change. It recognised the significant additional work required of them by the project, and it protected shareholder value.
“If senior executives left during the process it would have presented a picture of instability and that would have undermined possible interest and proposals. It is important to note this is a normal course of action for such programmes.”
Morrison acknowledged that the information should have been included in the Scheme Booklet but that oversight was corrected immediately after it was identified.