21 Oct 2013

Synlait says takeover bid best of five offers

2:59 pm on 21 October 2013

Canterbury dairy farming company Synlait Farms expects to release a takeover offer in about two weeks, which if it's accepted will put it largely in the hands of the Chinese company that bought the 16 Crafar farms in the North Island last year.

Synlait Farms owns 13 farms south-west of Christchurch, milking 13,000 cows.

The take-over bid has come from a Chinese-New Zealand joint venture SFL Holdings, made up of a subsidiary of Chinese company Shanghai Pengxin and two of the three founders of Synlait, John Penno and Juliet Maclean.

The three founders currently hold just over half of the shares. There are about 100 other shareholders, mostly dairy farmers.

If they accept the bid, the Shanghai Pengxin subsidiary would own 74% of the company and John Penno and Juliet Maclean 26%.

Synlait Farms chairman Barry Brook says the takeover was the best of five offers received after it put out a capital raising proposal in May.

He says the offer is 8% above the audited book value at the end of last season.

Mr Brook says the deal builds in a strong New Zealand involvement, with founders John Penno and Juliet Maclean continuing in the business at a management and governance level, as well as continuing to employ the firm's 70 staff.

He says the takeover will need shareholder approval and clearance from the Overseas Investment Office.

Synlait Farms supplies the dairy processor and exporter, Synlait Milk with about 10% of its milk.

John Penno is also co-founder and managing director of Synlait Milk, whose biggest shareholder is another Chinese company, Bright Dairy.

Federated Farmers watchful

Federated Farmers says it will be keeping a close watch on a takeover bid.

Federated Farmers president, Bruce Wills, says its main concern is vertically integrated foreign ownership of both farming and processing.

"There is a danger, we think, that if somebody comes in and owns everything from farms to milk tanker to processing company to marketing group it by-passes the huge benefit that New Zealand has invested in the brand and technologies of dairy farming.

"And we would be concerned if that was captured without some benefit coming back to New Zealand."