China’s Bright Food enters JV with Synlait

China’s Bright Food buys half of Synlait’s milk processing arm for $82 mln

July 19 (BusinessDesk) – Bright Dairy & Food Co., China’s third-biggest dairy company by volume, has agreed to buy a majority stake in Canterbury milk processor Synlait Milk Ltd. for $82 million.

Synlait Ltd., which abandoned a planned $150 million share sale last year due to a tepid response, will be a joint owner of its processing company with Bright Dairy, though it will keep and operate its farms through a separate company. Work on a new milk powder processing plant is underway, and is expected to double the company’s capacity by the 2011/12 season. The Synlait deal is Bright Dairy’s first investment in processing facilities outside China.

“This accelerates our value-added strategy and is aligned with Bright Dairy’s strategy of introducing a range of premium infant formula and milk powder products through its leading brands and retail distribution channels in the burgeoning eastern seaboard domestic markets of China,” said John Penno, Synlait Milk chief executive in a statement. “Synlait Milk will help Bright Dairy establish a market leading position in the infant formula and milk powder category with a planned co-branded range.”

The Bright Dairy deal is the second Chinese bid to capitalise on New Zealand’s dairy production, with Hong Kong-listed Natural Dairy (NZ) Holdings looking to inject $1.5 billion in a buy-up of land and facilities, including the 16 Crafar family farms. The Natural Dairy bid has sparked controversy from all quarters, with Federated Farmers joining calls from the Green Party to block Chinese interests purchasing New Zealand land.

Bright Dairy is listed on the Shanghai Stock Exchange with a market capitalisation of $1.7 billion, and is a subsidiary of Bright Food Group, the biggest food company in Shanghai. Earlier this month Bright Food unsuccessfully tried to buy CSR Ltd.’s Australian sugar unit.

Synlait, which aims to expand its milk powder capacity, is seeking funds to build a second drier at its main site. It currently processes 70 million litres of milk a year, according to its website.

Present shareholders include Japan’s Mitsui and Co, which acquired a 14% stake in 2007 for $13.5 million, implying a capitalisation of $96 million. Mitsui also made a further $16.5 million loan available to Synlait at that time.

(BusinessDesk)

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