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Pengxin, Synlait founders cross threshold in Synlait Farms takeover

Shanghai Pengxin, which bought the Crafar family farms in a controversial deal last year, and the Synlait founders have cross the 90 percent compulsory acquisition threshold in their $85.7 million takeover bid for Synlait Farms.

SFL Holdings, a joint venture between Pengxin and Synlait Farms chief executive Juliet Maclean and director John Penno, secured 91.16 percent of the shares in the company, meaning they can enforce Takeovers Code provisions to mop up any hold-outs.

Now they only need sign-off from the Overseas Investment Office and approval by Chinese regulatory authorities to wrap up the deal, giving them control of the company which operates 13 dairy farms and a total herd of almost 13,000 cows.

The $2.10 a share offer was a 31 percent premium to the $1.60 price at which the shares last traded on the Unlisted platform.

SFL plans to inject a further $20 million in fresh capital to reduce debt and accelerate investment. It also plans to reinvest all surplus cash to fund further growth. Penno and Maclean will hold about 26 percent of SFL, with Pengxin owning the rest via New Zealand Standard Farm, a subsidiary of its Milk New Zealand unit.

The deal emerged after Synlait Farms' board assessed several proposals to strengthen the company's balance sheet and fund future growth. Synlait Farms founders Penno, Maclean and Ben Dingle had already agreed to sell their 50.2 percent stake into the offer.

Pengxin's purchase of the 16 Crafar family farms was met with widespread opposition as political parties put pressure on the government over the sale of large tracts of farm land to foreign interests, particularly Chinese.

Synlait Farms supplies about a tenth of listed dairy processor Synlait Milk's needs. The companies were founded together in 2000, sharing some common ownership until 2010. Synlait Milk listed on the local stock exchange this year.

(BusinessDesk)

Comments and questions
3

Without prejudice to the particular purchasers involved here, the dairy farmers of NZ who are currently, or considering, supplying companies other than the Fonterra Co-operative should take extreme notice of this turn of events. Chasing the short term gain of a slightly higher payout for your milk can and will result in the loss of control of our industry.

The co-operative should not be supported blindly, but must be supported with vigilance, otherwise it will go down the same track that the bobby calf market did when farmers sold out for short term gain and the resultant long term pain by not supporting the Dairy Meats co-operative.

What a travesty! This company aspires to be the "best corporate dairy group in the world." It exceeded its covenants by paying out two farmer shareholders. It then finds that the best answer to the contrived debt problem is to sell out to Shanghai Pengxin. Then lo and behold the spoils are shared with the Chinese, Penno and Maclean.
Synlait Farms is too great a prize to be taken away from New Zealand investors. It is a shame that there are so few opportunities to invest in New Zealand agriculture.

Attention John Key - tenants in our own land!!