A group of former suppliers of Westland Milk Products has formally asked the Overseas Investment Office to block or delay the sale to Yili.
The suppliers want this done until they are paid millions of dollars owed to them for previously surrendering their shares.
The group’s spokesman, Pete Williams, said that at the end of the 2018 milking season he ceased supplying Westland and went to Fonterra, surrendering his shares at their nominal price of $1.50 per kgMS.
But he was not paid immediately because Westland has a technical right under its constitution to withhold payment for up to five years.
The five claimants named in the approach to the OIO are owed a total of $7 million to $8 million. But others are seen to be in the same position, as shown by Westland’s financial statements recording a non-current “share resumption liability” of $11.1 million.
Williams said that when the proposed sale to the Chinese was announced, they thought it “natural” that they would be paid when the sale went through. Only by chance did they discover that neither Westland nor the buyer intended to bring the payments forward.
Williams said he raised the issue with Westland chair Pete Morrison whose response was that they had left the co-op, didn’t stay loyal to the co-op and were simply unsecured creditors. The group had approached other board members and Yili, getting the same response.
The deferment clause was put into the co-operative constitution to protect it against a run on capital, but Williams said that wasn’t the current case. With Southern Pastures going in, there was more capital going in than left last year.
“In the old days they would have paid that money out immediately,” he said.
“Yili will take control of Westland. One would assume the balance sheet will be very strong. There’s no immediate redemption risk or issue for Yili so they’re essentially using that capital as an interest-free loan to enhance the commercial terms of their purchase.
“We just find that reprehensible.”
The former shareholders were hard workers who had only left the co-op because of its lack of performance. “We’re essentially being double-punched through a technicality.”
A letter has gone to the OIO on behalf of Williams Holdings Ltd, GSB Farms Ltd, Stoneridge Holdings Ltd, Tiptree Ltd and Fern Flat Ltd.
Among other points, the letter asks the office to consider their claim under the “benefit to New Zealand” test.
“The Overseas Investment Act is there to protect the interests of NZers and ‘NZ Inc’. Clearly, providing interest free loans for foreign investment in NZ companies is not really in NZ’s best interests,” said Williams.