Westland Dairy sale

[whatsup]

I see that W D has accepted a sale offer from a Chinese company for $588 mil , can some smarter that I please post the link from todays Stuff web site.

[777]

https://www.stuff.co.nz/business/farming/111385878/chinese-dairy-giant-yili-poised-to-buy-westland-milk-for-588m

Just copy the URL and then paste in thread.

[Balance]

I see that W D has accepted a sale offer from a Chinese company for $588 mil , can some smarter that I please post the link from todays Stuff web site.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214051

They are paying hell of a rich price for a company which is basically broke!

[steveb]

I see that W D has accepted a sale offer from a Chinese company for $588 mil , can some smarter that I please post the link from todays Stuff web site.
https://www.stuff.co.nz/business

[whatsup]

Are there any other N Z listed dairy companies out there.

Even though Balance has said that it is possible broke, this purchase is a game changer for W D as it opens access into China in a big way imo.

[Balance]

Are there any other N Z listed dairy companies out there.

Even though Balance has said that it is possible broke, this purchase is a game changer for W D as it opens access into China in a big way imo.

Agree with you. That's why the Chinese bought it and why the farmer suppliers will support it.

But big risk for the Chinese as the farmers are not contractually bound to supply Westland as I understand the co-operative arrangements post the acquisition.

So the Chinese really do need to do a Synlait or Open Country Cheese, and pay more than Fonterra.

[whatsup]

Agree with you. That's why the Chinese bought it and why the farmer suppliers will support it.

But big risk for the Chinese as the farmers are not contractually bound to supply Westland as I understand the co-operative arrangements post the acquisition.

So the Chinese really do need to do a Synlait or Open Country Cheese, and pay more than Fonterra.


W D farmers in the driving seat here as if the Chinese do not preform they will switch companies , Im picking that the new owners will pay a premium as they can from the retail side of the business where as Fonterra pays wholesale plus a share of its profit , approx. .50 / kg atm, interesting times at present for all parties.

[Balance]

W D farmers in the driving seat here as if the Chinese do not preform they will switch companies , Im picking that the new owners will pay a premium as they can from the retail side of the business where as Fonterra pays wholesale plus a share of its profit , approx. .50 / kg atm, interesting times at present for all parties.

Time for the dairy industry to send a rocket up Fonterra's arse.

Is that the sunset I see in Fonterra?

[stoploss]

Great , Shane Jones will be getting our money back then .

[minimoke]

Hmmm. So how much would the Chinese pay for SML if there was an opportunity

[Marilyn Munroe]

Agree with you. That's why the Chinese bought it and why the farmer suppliers will support it.

But big risk for the Chinese as the farmers are not contractually bound to supply Westland as I understand the co-operative arrangements post the acquisition.

So the Chinese really do need to do a Synlait or Open Country Cheese, and pay more than Fonterra.

Picture this in you minds eye;

A Fonterra tanker conveying de-watered milk from their Stillwater concentration plant to Racecourse Hill stopped at a level crossing to allow a train to pass conveying the Peoples Milk from the Rolleston concentration plant to the Red Banner Collectives Hokitika factory.

Boop boop de do
Marilyn

PS. Not as nutritious as Yak milk produced by oppressed Tibetan peasants who yearn for the return of His Holiness the Dalai Lama.

[kiwidollabill]

I'm trying to figure out what Yilis plan is here. They already have Oceania Dairy and from what I hear they have a full supplier book until they expand the plant. Westland do source from cantebury, they concentrate the liquid milk in Rolleston and ship it over the Alps for processing...`Current product mix for W D is the regular commodities but also IF base powder which they export offshore already.

I just cant see the big strategic win in paying so much.... perhaps having a larger IF base supplier within your own group of companies is worth it. But the Chinese do seem happy with loading their companies up with debt.....

[minimoke]

I'm trying to figure out what Yilis plan is here. They already have Oceania Dairy and from what I hear they have a full supplier book until they expand the plant. Westland do source from cantebury, they concentrate the liquid milk in Rolleston and ship it over the Alps for processing...`Current product mix for W D is the regular commodities but also IF base powder which they export offshore already.

I just cant see the big strategic win in paying so much.... perhaps having a larger IF base supplier within your own group of companies is worth it. But the Chinese do seem happy with loading their companies up with debt.....
For $250m they could have come to some arrangement with SML (or fonterra) to build further capacity in Canterbury . I can quite see the sense of carting raw material over the Alps and then carting it back again as finished product.

[Sideshow Bob]

Appear to have well over-paid, not dissimilar to SFF 50% sale to Shanghai Maling. Net members funds are only $123m and if take their coop shares (treated as a liability) then only get $229m. Chinese play a longer game though...…but sale is not based on any sort of multiple of EBIT.

Westland have about the lowest payout in the industry over the last few years, so will have to pump up their payout to be competitive, and maintain supply on the coast. Fonterror have their factory at Darfield and while they have their own issues, would suspect they will be active trying to get supply.....

Might be a few new tractors/Rangers/Hi Luxs on the coast soon.

[Beagle]

Hmmm. So how much would the Chinese pay for SML if there was an opportunity

Megabucks !!

[Ggcc]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214051

They are paying hell of a rich price for a company which is basically broke!
Wait till they pay $20-30 billion for A2 milk lol

[glennj]

The vast majority of Westland Milk comes from the West Coast and not Canterbury. WMP suppliers in much of Central and all of South Westland don't have any processor to sell to but Westland Milk Products. Unless there is major investment on the Coast by a competitor that situation is unlikely to change.

[kiwidollabill]

For $250m they could have come to some arrangement with SML (or fonterra) to build further capacity in Canterbury . I can quite see the sense of carting raw material over the Alps and then carting it back again as finished product.

They are building a canning facility at Oceania, maybe this extra supply will help with utilisation %.

Still, I dont see the strategic long game in this....

[Leftfield]

..... Still, I dont see the strategic long game in this....

Chinese investors have an eye to the long term, its what their Belt and Road initiative is all about. Whether NZ's water, or our milk, it's all about securing food supply and trade dependancy.

At a micro level it reads as a good deal for Westland farmers..... at a Macro level is it still such a good deal?

For those in doubt about the Chinese long game, check out this. (https://www.nytimes.com/2016/03/21/world/australia/china-darwin-port-landbridge.html) China now has a 99 year lease on Australia's strategic Port of Darwin.

[Sideshow Bob]

Chinese investors have an eye to the long term, its what their Belt and Road initiative is all about. Whether NZ's water, or our milk, it's all about securing food supply and trade dependancy.

At a micro level it reads as a good deal for Westland farmers..... at a Macro level is it still such a good deal?

For those in doubt about the Chinese long game, check out this. (https://www.nytimes.com/2016/03/21/world/australia/china-darwin-port-landbridge.html) China now has a 99 year lease on Australia's strategic Port of Darwin.

Interesting in Australia, where they are vertically integrating themselves - land, processing facility, domestic transport, transport infrastructure etc.

I was at a conference recently for a sector where has been significant Chinese investment (as well as from other countries). There was a Chinese presenter, employed by a NZ govt entity. There was a line they said, that went something like this: "China was the number one country in the World, but relinquished this in the last 100 or so years. It is intent on again being number one country in the world".

Wasn't any reaction from the audience.....

[Joshuatree]

Chinese investors have an eye to the long term, its what their Belt and Road initiative is all about. Whether NZ's water, or our milk, it's all about securing food supply and trade dependancy.

At a micro level it reads as a good deal for Westland farmers..... at a Macro level is it still such a good deal?

For those in doubt about the Chinese long game, check out this. (https://www.nytimes.com/2016/03/21/world/australia/china-darwin-port-landbridge.html) China now has a 99 year lease on Australia's strategic Port of Darwin.

Yes a foot in the door and plenty of time to grease palms change rules, regs etc down the line, another soft takeover jigsaw piece. I really hope it doesn't get past OIO, but all that money is all most can focus on.

[minimoke]

Yes a foot in the door and plenty of time to grease palms change rules, regs etc down the line, another soft takeover jigsaw piece. I really hope it doesn't get past OIO, but all that money is all most can focus on.OIO will be interesting. Foreigners cant but residential property anymore. We might see a tightening of foreign companies

[Balance]

Yes a foot in the door and plenty of time to grease palms change rules, regs etc down the line, another soft takeover jigsaw piece. I really hope it doesn't get past OIO, but all that money is all most can focus on.

Yup - exactly like how the Americans came to NZ, bought Telecom (with the 'help' of Fay Richwhite etc) and proceeded to extract billions of dollars out of New Zealanders and leaving behind a buggered up Telco., one which could not even deliver UFB without government intervention.

Korea rolled out its UFB in 2004. Guess when Telecom was going to roll out UFB in NZ if Helen Clark did not intervene?

Did I read a lot of outcry about the Americans buying Telecom?

Yup - exactly like how the Australians came over and bought up all our banks and then, proceeded to extract billions of dollars each year out of NZ and control the NZ economy.

Did I read a lot of outcry over the Australians?

Shall we talk about forestry and who really owns the forests planted decades ago through the sweat, tears and toil of New Zealanders?

Did I read a lot of outcry about how we now export logs and jobs overseas?

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214337

Windfall of $500k each to the farmers for a bankrupt company!

Not hard to figure out what they would do!

[whatsup]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214337

Windfall of $500k each to the farmers for a bankrupt company!

Not hard to figure out what they would do!


Im picking that there will be heaps of W D supplier farms for sale shortly, with the terms of this sale/agreement and 10 years of matching the Fonterra price for milk this is a once in a life time opportunity for owners to exit their otherwise unsaleble farms, who would not want to sell ?

[whatsup]

Can someone post the very good todays N Z Herald article on W D, great write up on all things W D, rock and hard place, one could say that the same applies to Fonterra but on a smaller scale.

[Joshuatree]

Death throes of a dairy co-operative (https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214628)

Thanks for bringing that article up whatsup.

[bull....]

Death throes of a dairy co-operative: Westland Milk a loss of more than just money
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214628

[Joshuatree]

"Too many things aren't clear. We don't know if our farms are going to be tied in for 10 years. When we sell our farm does it have to be transferred to the new owner?"
Sheridan says an example of Westland's poor governance is that it has a plant building programme even while it is in debt and searching for a rescuer.
"Nothing should have been done while that was going on but they're talking about building milk transfer plants and giving farmers more indebtedness than they already had.
"There is no governance."
Sheridan would have liked Fonterra to have been involved but shareholders were never told about its interest, he says."
Death throes of a dairy co-operative (https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12214628)

[Jaa]

"We looked at standing alone and going to our shareholders [for capital] and using retained earnings or going to our banks. We looked at a cornerstone investor in the early part and we looked at a full trade sale and that's what this is.

Looked at everything except listing on and raising capital from the share market. Pretty sad indictment of the NZX isn't it?

[Sideshow Bob]

Professor Keith's perspective

https://www.interest.co.nz/rural-news/98915/keith-woodford-explains-how-westland-dairy-co-operative-created-its-own-demise-sale

Interesting stuff.

[whatsup]

Professor Keith's perspective

https://www.interest.co.nz/rural-news/98915/keith-woodford-explains-how-westland-dairy-co-operative-created-its-own-demise-sale

Interesting stuff.


There is another dairy company following the same path which only survives because of its size.

IMHO farmers should not be in charge of their own marketing company or any company that processes their milk, they are very good at producing milk/farming/developing land but they are driven by tax free capital gains and do not see or understand the big picture of business. IMO no more than 70 - 75% of milk returns should be paid out to them the balance should be kept inside the company to reinvest in worthwhile opportunities that are dairy related that come their way ( I know of two such opportunities that F has ignored to its peril ), other uses of reserves should be used as income smoothing mechanisms in down years , not to be confused with farmer subsidies and marketing opportunities.

[GTM 3442]

So what’s wrong with this country?

Since refrigerated shipping arrived in the late 19th century, New Zealand has been growing and exporting food and agricultural produce. It’s been what the country does, it's been where it makes it’s money for well over a century. But are the nation’s backbone industries accessible to the average private investor?

In the 21st century, the only primary sector business plan seems to be to sell up to overseas buyers. Just about everything you can think of - from forests to fruit juice to meat works to wine to dairy farms to retail butchers to wool scourers - all gone from the ever-shrinking local investment market.

And when the rare opportunities have presented themselves, New Zealanders have proved themselves almost unanimously unwilling to take advantage of those opportunities.

I’m beginning to think that New Zealand is a nation full of people who just can’t see past residential mortgage property, but who will still whine whenever anybody from outside is prepared to put their money where their mouth is when it comes to investing in the nations agricultural backbone.

You might be forgiven for thinking that New Zealand's most successful export has been talented people

[\rant]

[Sideshow Bob]

So what’s wrong with this country?

Since refrigerated shipping arrived in the late 19th century, New Zealand has been growing and exporting food and agricultural produce. It’s been what the country does, it's been where it makes it’s money for well over a century. But are the nation’s backbone industries accessible to the average private investor?

In the 21st century, the only primary sector business plan seems to be to sell up to overseas buyers. Just about everything you can think of - from forests to fruit juice to meat works to wine to dairy farms to retail butchers to wool scourers - all gone from the ever-shrinking local investment market.

And when the rare opportunities have presented themselves, New Zealanders have proved themselves almost unanimously unwilling to take advantage of those opportunities.

I’m beginning to think that New Zealand is a nation full of people who just can’t see past residential mortgage property, but who will still whine whenever anybody from outside is prepared to put their money where their mouth is when it comes to investing in the nations agricultural backbone.

You might be forgiven for thinking that New Zealand's most successful export has been talented people

[\rant]

Take the easy tax-free (until now) gains, leverage off equity of their house, have a focus on the short term, have a maxim of property always goes up/never lose money on property vs long-term, strategic thinking with less tax incentives. NZ company's generally have a record of poor results/lack of execution overseas, and in the primary produce arena, struggle to build any brand of scale - or at least don't have the profitability or reach to do so. Typically then won't invest in branding, where as primary sector supply behavior in NZ is often driven by who pays that 5 or 10 cents more - short-termist.

[whatsup]

Farmer S Hers voted 90% for sale today.

[bull....]

Farmer S Hers voted 90% for sale today.

money talks and look at the fonterra share price crashing wonder if related ? another chinese factory to take fonterra market share

[Joshuatree]

Professor Keith's perspective

https://www.interest.co.nz/rural-news/98915/keith-woodford-explains-how-westland-dairy-co-operative-created-its-own-demise-sale

Interesting stuff.

Thanks. So badly managed by people who are rewarding themselves with big bonuses for selling it.

"Westland Milk Products chief executive Toni Brendish has been criticised for a "huge conflict of interest" over a $680,000 bonus if the co-operative is sold to Chinese company, Yili.Bonuses will also be paid to other top management including $360,000 to its chief operating officer, $302,700 to its general sales manager and $100,000 to its chief financial officer.
Otago University senior accountancy lecturer Dr Helen Roberts said it appeared Yili was willing to pay the management to encourage farmers to sell their assets, raising a conflict of interest."




And below.

"Westland also lost a huge opportunity in 2009, when, following the tragic death of CEO Scott Eglinton, the new CEO reversed the policy of moving to A2.

[percy]

A sale will be a fantastic result for shareholders and the West Coast.
The dairy farmers will have a guaranteed priced for years and will be able to reduce their debt.
The new owners have the money to develop the company.

[whatsup]

A sale will be a fantastic result for shareholders and the West Coast.
The dairy farmers will have a guaranteed priced for years and will be able to reduce their debt.
The new owners have the money to develop the company.

A guaranteed price of milk for 10 years , then imo the farms will not be worth having as most farmers will want to "retire" and who will the natural buyers be, chinese dairy farmers who work for Yili ?

[bull....]

A sale will be a fantastic result for shareholders and the West Coast.
The dairy farmers will have a guaranteed priced for years and will be able to reduce their debt.
The new owners have the money to develop the company.

short term thinking in the long run it is just the takeover of the dairy industry in NZ and you will end up poorer like the rest of NZ. IM surprised peterss hasnt said or done more since he used to go on about the takeover of nz forestry sector years ago.

[percy]

short term thinking in the long run it is just the takeover of the dairy industry in NZ and you will end up poorer like the rest of NZ. IM surprised peterss hasnt said or done more since he used to go on about the takeover of nz forestry sector years ago.

Long term under their present structure they would have gone broke.
Had the ownership structure been altered years ago, they may have stood a chance to survive.

[RTM]

short term thinking in the long run it is just the takeover of the dairy industry in NZ and you will end up poorer like the rest of NZ. IM surprised peterss hasnt said or done more since he used to go on about the takeover of nz forestry sector years ago.

Not sure of what grounds they could say NO, given the foothold the Chinese already have in NZ Dairy industry.
Percy...10 years is a pretty short period of time IMO.
Sad days. Except from a short term financial perspective for the farmers involved I guess.

[percy]

RTM.6 months is a very long time for a heavily indebted Westland dairy farmer.

[whatsup]

So why didn't Fonterra buy out Westland Dairy and therefore build a moat around the N Z dairy industry, united we stand divided we fall, who is next ?

[macduffy]

So why didn't Fonterra buy out Westland Dairy and therefore build a moat around the N Z dairy industry, united we stand divided we fall, who is next ?

Quite simply, because Fonterra is a dairy farmers' co-operative whose owners are only interested in what they, not the dairy industry, receive. Yes, short-sighted - but that's the way the industry works.

[Sideshow Bob]

Keith's latest article (before the vote)

https://www.interest.co.nz/rural-news/100372/keith-woodford-says%C2%A0yili%E2%80%99s-bid-westland-milk-can-look-different-farmers

Did the govt owned SOE vote for the sale, and take the money????

[percy]

A guaranteed price of milk for 10 years , then imo the farms will not be worth having as most farmers will want to "retire" and who will the natural buyers be, chinese dairy farmers who work for Yili ?

Maybe,however I would think most of the farmers,will be looking forward to a bright future, now their debt burden has been removed.

[bull....]

Maybe,however I would think most of the farmers,will be looking forward to a bright future, now their debt burden has been removed.

until the day they end up like most farmers around the world. peasants

[percy]

until the day they end up like most farmers around the world. peasants

You need to visit Canterbury. Water,money,brains and enthusiasm has generated real wealth .

[bull....]

You need to visit Canterbury. Water,money,brains and enthusiasm has generated real wealth .

thats because a nz owned dairy industry rewards farmers immensly. milk price over anything else. as time goes on and the dairy industry becomes more foreign owned this will not be the case

[RTM]

RTM.6 months is a very long time for a heavily indebted Westland dairy farmer.

Agreed Percy. It's a very short term perspective tho. What do they talk about....the 100 year war ? And its not that its Chinese....I would feel the same about any country taking a huge share in NZ Inc. Its just that at the moment the Chinese are determined to secure their food supply and part of their focus is NZ. At present.

[percy]

Agreed Percy. It's a very short term perspective tho. What do they talk about....the 100 year war ? And its not that its Chinese....I would feel the same about any country taking a huge share in NZ Inc. Its just that at the moment the Chinese are determined to secure their food supply and part of their focus is NZ. At present.

A few years ago a friend of mine travelled on the Silk Road Train.
He said all the time looking out of the train's windows watching the hard working Chinese at work,he could not stop thinking just how many years would it it be before the rolls were reversed.