(Yicai Global) March 19 -- Inner Mongolia-based Yili Group will acquire all shares of Westland Co-operative Dairy, which is New Zealand's second-largest, for up to NED246 million (USD168 million).

It thus seeks to obtain a stable supply of high-quality milk from the South Pacific nation to hone its products' competitiveness and expand its overseas business.

The wholly-owned unit it has set up in Hong Kong for the purpose penned a provisional plan with the co-op yesterday, Yili announced last night.

Formed in 1937, Westland Milk Products, the co-op's trading name, produces and sells milk powder, butter, protein powder, pasteurized products and infant formula, per the notice. It also markets its EasiYo-branded dairy products in over 40 countries, including Australia, the UK and China, in addition to its local market.

The target has dispersed share ownership, with about 429 farmers that provide milk jointly holding all shares. The largest stake held was 4.5 percent as of Jan. 21, per the notice. Yili plans to seek approval from the New Zealand Takeovers Panel for the buyout before proposing a restructuring plan to the target's shareholders' meeting, the announcement stated.

Yili decided to acquire the company at premium of up to NZD246 million at NZD3.41 (USD2.3) per share since it will get about 4 percent of the country's raw milk supply after the purchase and the co-op's high value-added products can advance its position in the Chinese market.

Westland booked net assets of about NZD3.20 per share, based on its audited financial data as of July 31, per the announcement.

The two parties also signed a milk-supply agreement the same day, per which Yili Group will buy from all qualifying suppliers of the target over the next decade at a referenced base price starting from Aug. 1.

Editor: Ben Armour