The New Zealand Westland Co-operative will be sold to a Chinese dairy company, Yilli.
The company is offering shareholders $3.41 a share, representing an enterprise valuation of about $588 million.
Yilli is the largest dairy producer in China and Asia and acquired Oceania Dairy Limited in 2013 and since that time it has invested about $650 million in establishing milk powder, infant formula and UHT production lines for Oceania.
Westland chairman Pete Morrison said the board believed that the proposed transaction represented the best available outcome for its shareholders, and had the unanimous support of the board.
“The acquisition price represents an attractive price to the Westland shares’ nominal value. Westland will seek shareholder approval for the proposed transaction at a special shareholder meeting which is expected to be held in early July 2019,” Mr Morrison said.
“Under the proposed transaction our shareholder farmers who are existing suppliers upon the implementation of the scheme will receive the benefit of Westland’s commitment to collect milk and pay a competitive payout of a minimum of the Fonterra farm gate milk price for 10 seasons from the season commencing 1 August 2019.”
Mr Morrison said a supplier committee comprising five representatives from existing Westland suppliers and five representatives from Westland (under the new ownership) would be formed to maintain communications and transparency between existing Westland suppliers and Westland going forward.
Westland, largely based in the south island of New Zealand, had been paying suppliers NZ$6.07 for standard milk last season.
The company had total receipts of about $671 million last financial year.