The A2 Milk Company has made a non-binding offer to buy a 75.1% stake in dairy nutrition company Mataura Valley Milk for NZD 270 million ($176.41 million approx.).
The New Zealand dairy producer says that the offer is a result of talks to participate in manufacturing at Mataura’s Southland facility. Mataura has reportedly granted A2 Milk a period of exclusivity to conduct due diligence for the potential deal and to negotiate definitive transaction documentation.
According to A2 Milk, the exclusivity arrangements are supported by Mataura’s current majority shareholder, China Animal Husbandry Group (CAHG), which would retain a 24.9% interest under the proposed deal.
CAHG is a subsidiary of China National Agriculture Development Group, which is also the parent company of A2 Milk’s strategic partner in China, China State Farm Holding Shanghai.
Any transaction that results from the current discussions is expected to be settled towards the end of A2 Milk’s 2021 financial year and will be funded entirely from existing cash reserves.
“As previously announced, due to the increasing scale of our infant nutrition business, we have been assessing participation in manufacturing capacity and capability,” said Geoff Babidge, who has served as A2 Milk CEO since Jayne Hrdlicka resigned the post at the end of 2019.
“The potential investment in Mataura Valley Milk’s recently commissioned facility, alongside China Animal Husbandry Group, aligns with this strategic objective as we look to complement and build upon our current strategic relationships with Synlait Milk and Fonterra Co-operative Group, which remain in place.
“Our intention would be to invest further to establish blending and canning capacity at Mataura’s facility to support the establishment of a fully integrated manufacturing plant for infant nutrition.”
A2 Milk last year extended a supply agreement with Synlait Milk for nutritional products until July 2025.
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