Chinese firm spends NZ$82 mln for infant & whole milk powder

Chinese company Bright Dairy & Food Co Ltd is paying NZ$82 million for a 51% stake in Canterbury-based milk processing company, Synlait Milk Limited to help source infant and whole milk powders for the Chinese market.

Synlait, which tried unsuccessfully to float on the NZX last year, said the deal requires regulatory and shareholder approval.  Bright Dairy will invest in Synlait Milk  with the deal setting out that Bright Dairy and Synlait Limited become joint owners of Synlait Milk, with Bright Dairy holding a 51%. Independent of the deal and Bright Dairy, Synlait Limited will continue to own and operate the Synlait farms through a separate company.

(Update adds further detail, attachment to presentation).

Bright Dairy is listed on the Shanghai Stock Exchange and is China’s third largest dairy company by volume. A subsidiary of Bright Food (Group) Co Ltd, it has a market capitalisation of about NZ$1.7 billion and had revenue of NZ$1.63 billion last year. Founded in Shanghai in 1949, Bright Food (Group) is a large conglomerate in China's food industry with annual revenue of about NZ$10.5 billion.

Synlait Milk CEO, John Penno, said work had already started on building a second large scale milk powder processing production plant alongside Synlait's existing facility at Dunsandel in Canterbury. Penno said the new plant would be commissioned in time for the 2011/12 season, more than doubling capacity.

“Bright Dairy is an excellent partner for Synlait. This accelerates our value added strategy and is aligned with Bright Dairy’s strategy of introducing a range of premium infant formula and milk powder products through its leading brands and retail distribution channels in the burgeoning eastern seaboard domestic markets of China,” Penno said.

Meanwhile, Bright Dairy’s president, Benheng Guo, said the deal was his company's first investment in overseas processing facilities.

“In China the market for premium products from New Zealand and Australia is growing rapidly. Synlait Milk will help Bright Dairy establish a market leading position in the infant formula and milk powder category with a planned co-branded range, “ Guo said.

Penno noted the deal ended a lengthy process to secure the money to build  the second production plant and establish a long term, sustainable capital structure for the business. Construction of the new plant will create up to 300 jobs and, once operational, 50 full time positions.

“We can now move forward with confidence knowing that we have the support of an investment partner who shares our vision as producer of high quality and specialist milk powders and has the ability to leverage our value proposition in a market of growing significance. Over time we expect an increasing proportion of our product to be exported from New Zealand in consumer packs rather than in bulk sacks ensuring capture of a component of the value chain in New Zealand,” added Penno.

Synlait Limited was founded in 2000 by Penno, Juliet Maclean and Ben Dingle to develop a series of dairy farms which continue to be owned and operated by the company. Synlait Milk was launched from Synlait Limited to become a specialist milk processor incorporated in 2005 to undertake the processing of milk provided by Synlait Limited’s farms and other third party suppliers with a view to create value-added premiums from the production of high quality, specialist milk powders.

See attached presentation below.