Tuesday, 31 July 2018 12:40

Westland Milk co-op reviewing capital structure

Written by 
Westland chairman Pete Morrison. Westland chairman Pete Morrison.

New Zealand’s second largest dairy co-op is reviewing its capital structure with a view of funding future growth.

The review will look at a “full range of options” including introducing a cornerstone shareholder or merger or divestment of the co-op.

Westland chairman Pete Morrison says the co-op has begun implementing a new strategy focussed on more segregated higher value added products.  This should lead to an exciting future, he says.

“This strategy has the potential to add significant value to our business.  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 co-operative, 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 haverelatively 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 co-operative” he says. 

The strategic review is an important step to strengthen Westland’s position for the future. The board 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.

The strategic review process will focus on investigating a full range of options that could include:

  • continuing the current co-operative model, recognising our capital constraints;
  • introducing a cornerstone investor to provide new capital to fund growth; and
  • a merger or divestment of the co-operative. 

All options would be explored and we expect the process to run for several months, Morrison says.

“The board will keep shareholders updated on the process with the first update expected before Christmas this year.”

Shareholders will vote on any proposal that the board decides to bring back to shareholders, with two key principles underpinning any Board’s recommendations:

  1. Creating a competitive and sustainable payout; and
  2. Driving the value of the co-operative’s shares

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


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