Canterbury dairy company Synlait says regulators have approved acquisition of its dairy processing arm, Synlait Milk, by Chinese giant Bright Dairy and Food Co.
"The Overseas Investment Office (OIO) has approved the deal ... in which Bright Dairy is
Canterbury dairy company Synlait says regulators have approved acquisition of its dairy processing arm, Synlait Milk, by Chinese giant Bright Dairy and Food Co.
"The Overseas Investment Office (OIO) has approved the deal ... in which Bright Dairy is to acquire 51% of the New Zealand company for $NZ82 million," Synlait Milk chief executive John Penno said.
The OIO website has listed Finance Minister Bill English's new guidelines on land purchases by foreigners but has not listed the Chinese milk takeover, in which Synlait will retain a 49% stake.
Shanghai-based Bright Dairy is China's largest supplier of processed dairy products, and Mr Penno says the investment will be used to complete a second milk powder plant at Synlait's factory at Dunsandel, due to start operation in August 2011.
The plant, which is predicted to more than double Synlait's current processing capacity of 300 million litres of milk a year, is to produce infant formula and other formulated milk powders packaged for consumers in China and elsewhere.
Bright Dairy has an established distribution network along China's populous and increasingly wealthy eastern seaboard.
Synlait Milk handles only a fraction of the milkflows handled by Fonterra Co-operative Group, which is expected to process about 14 billion litres of milk this season, or 91% of New Zealand's production.
"This is a further step in attaining our strategic goal of becoming a leading supplier of specialised milk powder products to the Asian market, and growing into one of the larger milk processing businesses in New Zealand," Mr Penno said in a statement.
The Chinese company – whose principal shareholder is the Shanghai municipal government – is expected to appoint four of Synlait's seven board members.
Synlait Milk will still export to its existing client base and continue with a high-value niche special milk strategy, while Synlait will retain 100% ownership of Synlait Farms, which supplies about 25% of the milk to the Dunsandel facility.
This supply will drop to 12-15% when Dunsandel doubles production to 100,000 tonnes at the expanded facility.
Rejected by investors
Last year Synlait Milk's plan for a $150 million float on the NZX by Christmas was cancelled because of lack of support from retail-based investors.
Federated Farmers dairy chairman Lachlan McKenzie said at the time that the weakness of New Zealand's capital markets had been exposed by Bright Dairy.
Mr English said a new ministerial directive letter to the Overseas Investment Office would provide extra clarity and certainty for potential investors about the government's general approach to foreign investment in sensitive assets.
The government last year made several changes to simplify overseas investment rules, cut red tape and speed up processing times for applications. But now changes to regulations outside the Overseas Investment Act include:
• Two new measures under the benefit test used to assess investments in sensitive land:
• A new "economic interests" factor allowing ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted.
The new regulations are set to take effect in December 2010.
• Footnote: Parent company Bright Food (Group) is reported to be in exclusive talks about a possible purchase of UK-based United Biscuits (Holdings), whose brands include Hula Hoops snacks, McVitie's biscuits and Jaffa Cakes.
