6. Westland Co-op up for sale

Westland Milk to review ownership as it strives to boost returns. Photo: Getty Images

Westland Milk Products, whose payments to its cooperative shareholders have lagged behind rivals, may change its ownership structure as it looks at ways to improve returns. Tina Morrison reports one option is a sale.

Hokitika-based Westland said today it has appointed Macquarie Capital and DG Advisory to consider potential capital and ownership options that will create a more sustainable capital structure and support a higher potential payout. All options will be explored in the process expected to run for several months, it said.

Westland is New Zealand's third-largest dairy company and the second-biggest dairy cooperative. In recent times it has refreshed its governance and leadership team in the wake of criticism about its lagging returns to farmers and turned its focus to producing higher value products.

“This strategy has the potential to add significant value to our business," said Westland chair Pete Morrison. "We’ve had strong interest from new suppliers and we take great heart from that as well as the loyalty shown by existing shareholders. We are excited about the full range of opportunities in front of the cooperative, as well as new emerging possible opportunities.

“Shareholders have clearly indicated support for a plan that would create higher returns and shareholder value, which would likely require significant new capital.

“If the cooperative is to realise all the opportunities in front of us we need access to new and increased capital. We have relatively high debt levels and limited financial flexibility and therefore it is now timely to look ahead and consider the options that can provide a sustained, higher payout and improve the company’s financial flexibility. Obtaining new capital would make a significant difference to the cooperative” he said.

Options to be considered in the strategic review include continuing the current cooperative model with its capital constraints, introducing a cornerstone investor to provide new capital to fund growth, and a merger or divestment of the cooperative.

Westland's board expects to update shareholders before Christmas this year, and Morrison noted any proposal recommended by the board would be put to a shareholder vote.

The two key principles underpinning any recommendation would be creating a competitive and sustainable payout and driving the value of the cooperative's shares, he said.

“Our payout has been lower than our competitors for several years and the board is determined to address the situation for shareholders,” Morrison said.