Synlait investigates public float alternatives

Synlait Milk says alternatives to a previously planned sharemarket float to raise capital have emerged, given a recovery in dairy sector prices.

Synlait's plan for a $150 million float on the NZX by last Christmas was deferred because of a lack of support, with the company initially saying a float could be resurrected in 2010.

Managing director John Penno said yesterday that dairy sector conditions had strengthened in the six months since float plans were in their infancy. That gave the dairy processor and farm owner alternatives to a float. "The prospects for the industry are good – there's a lot more interest in dairy as the world economy continues to do the right things ... "It does give the company more options."

Private capital placements bringing in new investors were one alternative but Mr Penno said all options were being examined.

Canterbury-based Synlait wanted to use the float proceeds to double its milk processing facilities.

The pre-Christmas float process failed with a lack of support from New Zealand retail brokers, and resulted in some market criticism of the offer's lead manager – First NZ Capital.

Speaking from Brazil where he is on holiday, Mr Penno said planned factory expansion remained a key focus.

"We've said we're committed to getting the new milk dryer up and finding the funds to do that. At the moment we're busily working away trying to determine the best way to do that."

Synlait Milk's application for an Overseas Investment Office (OIO) approval granted on November 29 was based on the need to allow foreign ownership to creep above a 25 per cent threshold, he said.

The existing shareholders in Synlait are split, with 75.4 per cent from New Zealand, 22.5 per cent from Japan (Mitsui & Co) and 2.1 per cent from Ireland (an individual investor).

The OIO decision summary shows that the consent was granted in preparation for an overseas investment in significant business assets, "being the applicant's acquisition of rights or interests in up to 100 per cent of the shares of Synlait Milk", which owns land associated with the factory.

These land packages include 445 hectares of land at Irvines and Heslerton roads, Dunsandel – the site of Synlait's processing plant and also a separate nearby 229ha parcel.

Synlait chief financial officer John Hunter said any overseas investor taking the combined overseas investment above 25 per cent could face high legal costs without an OIO consent.

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