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$120m IPO for Synlait Milk to grow

Last updated 05:00 25/06/2013

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Canterbury milk processor Synlait Milk has announced a $120 million offer of shares to the public to build new facilities and hasten growth.

The dairy firm is offering $75m of new shares and $45m of shares from existing shareholders.

The indicative share price is $2.05 to $2.65. The final price will be set on July 10 after institutional shareholders and brokers bid for the shares.

Trading on the NZX will start on July 23. Interested retail investors need to apply to their brokers.

Synlait Milk is planning to repay debt with the $75m of new capital and refinance its debt for $183m of "growth initiatives" planned in the next two years.

It already has resource consents for a $15.1m lactoferrin extraction and purification facility, a $27m blending and consumer packaging plant and a $11.8m dry store.

It is preparing to apply for consents for a third large dryer, costing $110m, for its Dunsandel processing plant, 40 kilometres south of Christchurch.

The prospectus said Synlait Milk expects to complete the new facilities in 2015 and see the financial benefits start to come through in the year to July 2017.

The company's business model is to supply specialised higher value dairy ingredients to leading milk-based health and nutrition companies internationally.

Managing director John Penno said Synlait Milk "is ready to accelerate the development of our promising infant formula and nutritional products business".

After the capital raising, the company would end up with a reasonably conservative balance sheet and strong cash flows.

The board was signalling it would not pay dividends in the year to July 1, 2014, but at some point it might begin paying dividends, Penno said.

"We are a growth-focused company and we see lots of opportunities to continuing growing."

Asked about cornerstone shareholder Bright Dairy's intentions, Penno said: "I think they are showing all the signs of a long-term stable shareholder."

Bright Dairy holds 51 per cent, after pumping in $82m of capital in 2010. Neither it nor Japanese investor Mitsui is selling any of their shares.

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