A2 votes for deal to buy out Australian partner

A special meeting in Auckland of A2 Corporation Ltd shareholders has approved a deal to buy up the remaining 50 percent stake in Australia's A2 Dairy Products Pty Ltd that it does not already own.

In return, its partner in the company, ASX-listed Freedom Nutritional Products Ltd, will get a 25 percent stake in A2 Corp when the deal is completed -- probably on Thursday. Freedom will have an option of later increasing its stake to 27 percent.

A2 Corp has said full ownership will give it exclusive rights for the production and sale of A2 milk products in Australia and Japan, and chief executive Scott Pannell said the acquisition left the company in a stronger financial cash-flow position, paving the way for overseas expansion.

In Australia, up to 15 suppliers across northern Victoria, New South Wales and southern Queensland supply 20 million litres for white milk sales and extra milk for yoghurt. The company has a licensing agreement with yoghurt brand Jalna.

The company has just run a 10-week advertising campaign in Melbourne from which it hopes to grow sales by 30 percent. A year ago it was launched in Western Australia. The Australian arm is reported to be looking to build on its intake of just over 20 million litres.

The company has claimed that dairy cows originally produced A2 type of beta casein protein only, but the breeding of European cows for higher yields has led to some cows producing an A1 type of the protein and that many milks in shops are a mix of the two types.

It said that milk with only the A2 type of protein "may provide protection" from a range of intolerance responses to cow's milk protein and assist digestion.

When the milk was originally marketed in 2003, it was sold as a "risk free alternative" to standard milk produced by dairy giant Fonterra, which contains a mix of A1 and A2 beta casein proteins.

A2 Corp claimed the beta casein A1 found in most cows' milk sold in New Zealand had been linked with the development of coronary heart disease, childhood diabetes and also implicated in autism and schizophrenia.

But food manufacturers are legally barred from making therapeutic claims for their foods -- such as being capable of curing illness -- unless they substantiate the claims with scientific testing and register the food as a medicine.

So the company "knocked" the ordinary milks, claiming that "beta casein A1 may be a primary risk factor for heart disease in adult men, and also be involved in the progression of insulin-dependent diabetes in children".

But a European Food Safety Authority (EFSA) review, which canvassed the claims that milk containing A2 beta casein was less likely to cause health problems than the milk containing the A1 form, said that different types of cow's milk were safe to drink and no one type of milk was safer than another.

The EFSA concluded that a formal risk assessment was not needed.