Synlait Milk launches expansion-funding NZ$120m public share offering


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The IPO will fund a series of production-focused "growth initiatives," the company has claimed.
The IPO will fund a series of production-focused "growth initiatives," the company has claimed.

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New Zealand-based infant formula manufacturer, Synlait Milk, has launched an initial public offering (IPO) of shares in the hope to raising around NZ$120m (US$93m) to fund a series of "growth initiatives."

Synlait Milk, which manufactures infant and adult nutrition products and milk powders, announced earlier today that it is seeking to raise NZ$75m (US$58m) through the IPO and an additional NZ$45m (US$35m) through a secondary offering.

The price range for the offer of between NZ$2.05 and NZ$2.65 (US$1.58 and US$2.05) per share will give Synlait Milk a total share value of between NZ$305m and NZ$372m (US$235m and US$287m). On completion of the offer, Synlait Milk will be listed on the NZX Main Board under the stock code ‘SML’.

The IPO, which is scheduled to open on 10 July 2013, will “enable the funding of Synlait Milk’s growth initiatives,” ​the company has claimed.

Synlait identified “further growth initiatives”

“To continue our growth, we have identified a number of further growth initiatives which we wish to pursue in the near term. This offer will raise $75m in new capital which will be applied to retire debt and will allow us to access further debt finance,” ​said Synlait Milk chairman, Graeme Milne.

The company has plans to construct a new lactoferrin extraction and purification plant, an on-site blending and consumer packaging facility, a 10,000 square metre dry store, a quality testing laboratory, an Ammix butter plant, and a new spray dryer.

Also commenting, said Synlait Milk managing director, John Penno said: “We are pleased with where the company has got to, and are ready to accelerate the development of our promising infant formula and nutritional products business.”

These “management and investment initiatives”​ are scheduled for completion by mid-2015. The “full financial benefits​” will be felt from 2017, Penno added.

Through all this we are committed to building and maintaining a strong financial position so that we are positioned to continue to strongly grow the business,” ​he said.

Bright Dairy to maintain board control

Synlait Milk's largest shareholder, China-based Bright Dairy, which currently holds a 51% stake in Synlait Milk, has elected not to sell any of its shares in the company.

As a result, Bright Dairy's shareholding in Synlait Milk is expected to reduce post-IPO to between 38% and 41%.

Despite the dilution of Bright Dairy's stake in Synlait Milk, the NZX has granted a waiver from a listing rule that will allow Bright Dairy to maintain its control of the company’s board.

The NZX granted the waiver after Synlait Milk revealed that Bright Dairy would not support the IPO unless it could continue to consolidate Synlait Milk into its Chinese company accounts, which to do it had to have control of Synlait Milk’s board.

The waiver enables Bright Dairy to continue to appoint four of eight Synlait Milk directors. The NZX agreed to the waiver on a number of conditions, including that Bright Dairy owns no less than 37% of the shares of Synlait Milk.

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