Synlait tipped for $73m share takeover by Chinese firm

The independent committee of directors, Barry Brook and Stephen Howse, made a “unanimous​” recommendation shareholders accept the NZ$2.10 ($1.76)-per-share offer.

The bid was offered last month by SFL Holdings, a joint venture firm for Shanghai Pengxin and two of Synlait’s founding directors, John Penno and CEO Juliet Maclean.

Offer is 8% above valued price​

At NZ$2.10 ($1.76), the proposal is higher than the NZ$1.86-$2.02 ($1.55-$1.69) value-per-share estimated by independent adviser Grant Samuel’s appraisal.

The committee said in a statement SFL’s offer represented good value:

“In the 2013 audited accounts of Synlait Farms, the equity value of the company translated to $1.94 a share, prior to any transaction costs, and the offer is an 8% premium to this​.”

The New Zealand dairy firm’s major shareholders, Ben Dingle, Juliet Maclean and John Penno, accepted the offer, entering an agreement to lock up their 50.18% stake.

Adviser foresees growth​

Grant Samuel estimated an above-average price for Synlait of NZ$9 ($7.5) per kg of milk solids for 2013-2014, and a fall to NZ$6.80-$6.90 ($5.67-$5.76) by 2016, followed by a 2% rise the year after.

The report said Synlait spent the last decade buying dryland and converting it to dairy pasture. This provided scope for future growth, but debt levels mean it would need cash to fund any expansion.

Assuming no future acquisitions, and maintenance capital expenditure of NZ$1.7m ($1.4m) a year, Grant Samuel valued Synlait at NZ$204m-$210.4m ($107m-$175m), with equity between NZ$76m ($63m) (NZ$1.86/share) and $82.3m (NZ$2.02/share).

SFL’s offer will remain open until December 6. To go ahead, it will need to be accepted by holders of 90% of Synlait shares, and receive authorization from New Zealand's Overseas Investment Office and Chinese regulators.

Synlait Farms, based in Canterbury on New Zealand’s South Island, manufactures nutritional and value-added dairy powders, including infant milk formula and products for pregnant and breast-feeding mothers.