Chinese dairy behemoth Yili announced on Monday that it will buy New Zealand’s second largest dairy co-operative, Westland, in cash for no more than NZ$246 million ($168.5 million).

A subsidiary of Inner Mongolia-based Yili agreed to pay NZ$3.41 per share.

Under the deal, Yili said it would commit to a 10-year promise in which Westland will buy qualified suppliers’ milk at their farm gate prices not lower than those of the bigger co-operative, Fonterra. Farm gate prices refer to prices of milk bought directly from farms. The promise comes as Westland admitted it had failed to maintain a "competitive" buying price from suppliers in the last few years.

The purchase is pending approval by both China’s and New Zealand's governments, as well as Westland’s shareholders.

Established in 1937, Westland provides around 4% of New Zealand’s milk. The company exports dairy products to over 40 countries. Yili said it will leverage Westland’s quality milk to support further dairy production and sales in China and overseas.

In 2018, Westland's net profit dropped 62.8% year-on-year to NZ$560,000. In the same year, Yili's net profit attributable to owners of the parent company increased 7.31% year-on-year to 6.44 billion yuan ($959.18 million).

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