Canterbury-based milk processor Synlait has announced the sale of a majority stake in its production arm, Synlait Milk, to Chinese dairy giant Bright Dairy & Food Company.
Bright Dairy has acquired 51% of Synlait Milk for $82m in a deal subject to regulatory and shareholder approval.
The investment will go towards the expansion of Synlait’s Dunsandel plant to include a second drier by mid-2011.
Synlait CEO John Penno says the announcement is good news for local farmers, who will have to increase production in order to meet Synlait’s higher demand for milk.
“We have a list of farmers who want to continue to supply us with milk, or want to begin.
"We’re full at the moment, we’ve taken all the additional milk we can for the new season, which is about 4 million extra kilos for the coming year, and we’ll be working with local farmers to source all the extra milk we need for the expansion."
Penno says despite Fonterra’s plans to expand their processing operations in the area, he doesn’t have concerns about supply.
"Canterbury is the fastest growing milk supply base in the country, with compound average growth rates of around 10% over the last decade.
The Government’s already talking about supporting irrigation initiatives in this area so there’s a lot more room for growth.
Really our strategy has us only taking a very small portion of the milk available, so we don’t see it as a problem – there’ll be plenty of milk to go around.”
The deal comes after Synlait failed to attract investor interest for an Initial Public Offering last year.
Federated Farmers President Don Nicolson says the company’s courting of offshore capital is a black mark against our own capital markets.
“That’s a sad indictment on a country that has had a lot of cash lost in recent years. I’m told that 59 funds have collapsed since 2006, to the tune of $6.9b.
"That takes a lot of money out of the pool, and of course we’ve got Government imposing costs on businesses that again take a lot of money out of the system, in fact the cost of Government has doubled in the last 10 years.
"All that effectively is taking money out of the capital markets.”
