Fonterra and A2 Milk explore taking Synlait private
Fonterra and A2 Milk are exploring a joint take-private proposal for Synlait, a New Zealand dairy processor. The arrangement would align A2 Milk’s existing minority holding with Fonterra’s proposed role as a financing and operating partner.
A2 Milk’s stake in Synlait is 19.8%. The proposal concerns control of the processor and A2 Milk’s supply chain exposure in China. Synlait’s Dunsandel plant in Canterbury has the registration from China’s State Administration for Market Regulation required to produce A2 Milk’s infant milk formula for the Chinese market.
That product line represents almost half of A2 Milk’s infant-formula sales. The Dunsandel site is therefore tied to A2 Milk’s China-label production. The source describes control of Synlait as addressing supply-chain vulnerabilities connected with the Chinese regulatory environment.
Synlait has remained under financial pressure after receiving capital and restructuring its debt. Its controlling shareholder, Bright Dairy and Food, a Chinese state-owned company, owns 65% of Synlait and previously supported a recapitalisation. Synlait also received a NZ$320m refinancing from a banking syndicate and replaced a shareholder loan with NZ$130m of new funding.
The processor has pursued asset sales to manage liquidity and reduce debt. It sold its Pokeno manufacturing plant on New Zealand’s North Island to Abbott for NZ$307m. Chief executive Richard Wyeth has also left the company.
For Fonterra, the proposal follows a change in corporate focus under chief executive Richard Allen, who succeeded Miles Hurrell in May. Fonterra sold its global consumer brands and ingredients businesses to Lactalis for NZ$3.3bn and has since concentrated on business-to-business processing scale, milk-pool optimisation and specialised ingredients.
Synlait’s Dunsandel operation collects more than 800m litres of milk a year and produces between 450 and 500 tonnes of powder each day. For Fonterra, taking the site into its operations would remove a regional processing competitor and provide access to Canterbury milk supplies.
