Canterbury dairy producer and processor Synlait is looking to shed as much as 70 percent of its holding in Synlait Farms, with potential for the 4,820 hectares of prime, irrigated Canterbury dairy farmland to be sold to offshore buyers.
However, chairman Barry Brook told BusinessDesk there was “significant interest from potential New Zealand investors as well as offshore”, and it was “unlikely” that the 51 per cent Chinese owner of sister company Synlait Milk, Bright Dairy, would be a bidder.
Synlait Milk, which opened a $100 million high-value milk powder plant at Dunsandel last week, brought Bright on board last year after failing to raise capital in a share float offered to New Zealand investors last year. A float for the farm-owning subsidiary had not been contemplated, Brook said.
Synlait was expecting to realise around $70 million from the proposed transaction, which would see Synlait Farms and Synlait Milk operate independently in the future with different shareholders, while maintaining a “strong customer-supplier relationship,” said Brook.
Synlait has appointed boutique Auckland investment firm, M C Capital Ltd, to issue an investment memorandum seeking “an investor … to better position the dairy farming business and take advantage of identified growth opportunities.”
Brook said Synlait’s three founding shareholders, John Penno, Juliet Maclean, and Ben Dingle intended to remain shareholders in the farming company, but that the decision to offer a large, majority shareholding was in part motivated by the desire of some other shareholders to exit the business.
The proposed sale places another large block of dairy land on the market, along with the so-called Crafar farms, which are in receivership and mired in a prolonged Overseas Investment Office approval process, a suite of central North Island farms owned by Carter Holt Harvey, and the dairy portfolio of Dairy Holdings, which is part of the realisation process following the collapse of the empire built by Allan Hubbard, of South Canterbury Finance.
“The Synlait board considers it an opportune time to seek investor interest due to the positive international demand for protein and recent investment activity in agriculture in New Zealand and globally,” said Brook in a statement.
“However, Synlait has strengthened its balance sheet and is generating strong cash flows and will only enter into a transaction on terms that fairly reflect the value of the business.”
Synlait Farms has been supplying about 10 percent of Synlait Milk’s raw material, although this will drop now that the new plant is open, with greater capacity.
Expressions of interest are being sought by Dec. 20.