19 Jul 2010

Chinese dairy food giant buys Canterbury company

6:30 pm on 19 July 2010

A Chinese dairy food company has bought a controlling stake in the Canterbury-based milk processing company Synlait Milk.

Bright Dairy & Food will own 51% of the company, which it will use to source high-quality infant and whole-milk powders for sale in China.

Subject to regulator and shareholder approval, Bright Dairy will invest $82 million in the New Zealand firm by becoming a majority partner in its processing arm.

Principally engaged in the processing, production and distribution of dairy products for the domestic Chinese market, Bright is one of China's top three dairy companies.

'No qualms' over melamine link

Synlait chief executive John Penno says he has no qualms about becoming involved with the firm, which was caught up in the scandal over milk powder being adulterated with toxic melamine.

Almost all Chinese dairy companies were affected by the melamine situation, Mr Penno says, and Bright was one of the "cleaner" ones.

Mr Penno says that the levels of melamine concentration found in Bright's products were much lower than the amounts that harmed children, and that the company has since worked hard to ensure the quality of its products.

He adds that Bright - which he describes as "one of China's most trusted brands" - is investing in Synlait's milk processing and marketing business, not its farming operation.

Second plant can now be built

Chairman Graeme Milne says the investment allows the company to move ahead with expansion plans, including a second dairy plant. Synlait tried to float its production arm on the stock market late last year but failed to garner support from small investors.

Mr Milne says he's confident the deal will be approved by the Overseas Investment Office.