Five non-executive directors who quit the board of Australia’s largest dairy company this week say they resigned over a difference of opinion about the future management of dairy farms in north-west Tasmania.
Moon Lake, owned by Chinese businessman Xianfeng Lu, purchased the Van Diemen’s Land Company (VDL) dairy farms in north-west Tasmania in 2015.
All of the non-executive directors of Moon Lake — Dr David Crean, Keith Sutton, Rob Poole, Bruce Donnison and Simon Lyons — resigned on Monday, and VDL Farms chief Evan Rolley announced he would not extend his contract beyond June 30.
Former deputy chairman Dr Crean said they felt continuing as directors was untenable because they believed Mr Lu was not accepting their advice about a proposed new governance structure.
“Under the restructure Mr Lu will be the CEO of all of the companies including the VDL farms, and running that with a general manager,” Dr Crean said.
“We said to him that was not acceptable, that you needed a dedicated CEO to run the VDL farms.”
Dr Crean said Mr Lu also rejected the board’s recommendations about capital expenditure on the farms, including about irrigation infrastructure.
“There’s inadequate irrigation, so we strongly recommended that as the number one priority that adequate water storage facilities be built to provide irrigation in future years to mitigate against drought, and that was rejected,” he said.
Moon Lake says new corporate structure will help it grow
On Tuesday, Moon Lake announced the Foreign Investment Review Board (FIRB) had approved its proposed corporate restructure.
Currently Mr Lu is the sole owner of Moon Lake, and its ownership will be transferred to Shenzhen Stock Exchange-listed company Chinese Ningbo Xianfeng New Material Co Ltd (APlus), in which Mr Lu has a 35 per cent share.
Moon Lake and sister company VAN Dairy will come under the control of a new Australian holding company with a chief executive and board, which will appoint general managers to run Moon Lake and VAN Dairy.
Mr Lu said the new structure would allow the group to become a vertically integrated dairy business which sells dairy products in Australia and internationally.
“We are of the view that the corporate governance structure of the Australian operations needed to change in order to best achieve these strategic goals,” he said.
“However, given the restructure and proposed new governance structure, the non-executive directors and the CEO of VDL Farms agreed to part ways.”
Mr Lu said there would be no change to operations at the VDL farms and no job losses.
Mayor of the Circular Head Council Darryl Quilliam said he had already spoken to Moon Lake managing director Sean Shwe, who had allayed his concerns about on-the-ground impacts.
“He reassured me that there’s not going to be any change on the farms at all, there’s just change in the governance of the company,” Mr Quilliam said.
“So I’m really pleased about that for our farmers and for the suppliers of Moon Lake it’s business as usual.”
Company focus on capital, Asian markets
PAC Partners dairy analyst Paul Jensz has been in contact with Mr Lu and Moon Lake for about three years.
He said Mr Lu had always intended to transfer ownership of Moon Lake to the listed company, but the move had been delayed by the Australian dairy price crisis of 2016 and issues with the FIRB.
“Mr Lu and the A-Plus team want to grow a very large dairy business and use access to capital both here and potentially in China to do that, and it was hard to do that off his personal balance sheet, it was a much easier process and a much more transparent process to do that in a listed vehicle,” Mr Jensz said.
He said the new board was likely to have more members with specialist knowledge of the Chinese market.
“One of the opportunities that Mr Lu and his team sees is that linking Tasmanian dairy with the Chinese market, so there would be both local representation here in Tasmania, and there would also be representation in the distribution channels in China as well.”
By: Laura Beavis and Margot Kelly