15 May 2013

Synlait considers stock exhange listing

9:30 am on 15 May 2013

Dairy processing company Synlait Milk is considering an initial public offering (IPO) of shares and listing on the New Zealand stock exchange.

The Canterbury firm is 49% owned by Synlait Ltd and 51% by Shanghai-based Bright Dairy.

Synlait says the proceeds of any offer will be used to support various growth initiatives and debt refinancing.

Last week, the company said it had received resource consent to build a new packaging plant at Dunsandel.

It is also spending $15 million to produce lactoferrin, a key ingredient in baby formula.

Milford Asset Management executive director Brian Gaynor says there will be keen interest in Synlait shares as it gives access to the agriculture sector, an important part of the New Zealand economy.

Mr Gaynor says Synlait and other companies will be aiming to list on the stock exchange before the partial float of state-owned Meridian, expected in the last quarter of the year.

He says it's Synlait's second try at an IPO but this time it should succeed.

"That was a time when investors were very conservative - the global financial crisis was in the headlines all the time and they just didn't get the level of support they wanted.

"It's been three years since we had a look at it, but on the face of it, unless something drastically has gone wrong in that period, I would think that most people will begin to look at Synlait from a positive view rather than a negative view."

Craigs Investment Partners' head of private wealth research, Mark Lister, says the listing will follow the success of two other dairy firms.

"Fonterra's been an outstanding float and it's gone very well for Fonterra itself and for investors that have participated."

He says A2 milk has also been "a really interesting one that seems to be doing all the right things".

"You look at what's driving the New Zealand economy in terms of the export growth of the dairy sector and the demand for our agricultural products from Asia and China - there really is a very strong sort of thematic there, so it's certainly part of the market that people are interested in."

Prior to any IPO, Synlait Limited says it plans to distribute to its shareholders the shares it holds in Synlait Milk.

As part of the proposed IPO, Synlait Limited shareholders are being offered the opportunity to sell some or all of their shares in Synlait Milk.

The company says the offer price will be set by way of a bookbuild process managed by Synlait Milk's advisers, First NZ Capital and Goldman Sachs, which are joint lead managers of the proposed IPO.