Questions and close scrutiny need to be taken over Yili's proposed purchase of Westland Milk Products before the ink is dried on the deal, Federated Farmers national dairy chairman Chris Lewis says.

''From my viewpoint, you've got to encourage people to ask questions to see what the plan is.

''It's another business getting bought from overseas and one thing you notice is that overseas companies don't concentrate on dividends,'' he said.

The move might also lead to more New Zealand companies being sold to foreign companies.

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''New Zealand investors and farmers need to focus on strong local leadership with strong balance sheets.

Read more from Federated Farmers here.

''Fonterra has billions of debt and is now selling off.

''Growth shouldn't come before balance sheet strength.''

Last week, Westland Co-operative Dairy Company board signed a conditional sale of its dairy co-operative to Chinese-government-owned Jingang Trade Holding, a subsidiary of Mongolia Yili Industrial Group, for $588million.

Yili also owns the Oceania dairy plant at Morven in South Canterbury.

Westland chairman Pete Morrison said the proposed sale had the unanimous support of the board. Shareholder approval for the possible sale will be sought at a meeting in July.

Federated Farmers national dairy chairman Chris Lewis. Photo / Supplied
Federated Farmers national dairy chairman Chris Lewis. Photo / Supplied

Lewis said that from feedback he had received, farmer shareholders to Westland were questioning whether a sale was the right way to go.

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''I've had calls from suppliers who say 'stay as we are and pay down debt'.

''Other comments have been the statement that Yili will match Fonterra's milk price for the next 10 years.

''That means Fonterra will need to continue to be a lead player. Also, they ask, is it good to tie your fortunes to another company with billions of dollars of debt?''

He said the planned sale would create a lot of discussion with farmers.