Synlait float to raise $150m

Milk company Synlait is planning to float on the New Zealand sharemarket by Christmas to raise $150 million from institutions and the public so it can double its milk processing capacity.

It is likely to be the first New Zealand-only initial public offering this year, although it will come after the November dual-float of Kathmandu on the ASX and NZX.

The bulk of the extra capital will be used by Synlait to build a second milk processing factory to more than double its production, with some used to drive exports into Asia.

In doing so, it is looking to remain a step ahead of other potential dairy sector floats, driven by the recognition that the primary sector is the backbone of New Zealand – but under-represented on the NZX.

Timaru multi-millionaire Allan Hubbard has also indicated he is interested in offering shares in Dairy Holdings.

As for Synlait, the process of switching the Dunsandel-based privately held company into an NZX firm is the brainchild of its managing director, John Penno, alongside North Island-based farmers Ben Dingle and Juliet Maclean, the founders.

The start of Synlait goes back to 2000 when the three jointly bought the 600-hectare Robindale farm at Te Pirita near the Rakaia River.

Then it developed a milk powder plant investing more than $105m in processing and storage assets that started pumping out milk products in August 2008.

New Zealand dairy exports were worth $9.9 billion in the year to March 2009, and one market commentator said the time for a dairy company float would be well timed.

Investors had an opportunity with commodity asset values off their 2007-08 peak but signs of improving dairy prices.

In Fonterra's November auction whole milk powder prices were up 13.7 per cent for the month to US$3437 (NZ$4775) a tonne.

More details about the Synlait float will be contained in a prospectus due out in the next few weeks.

When asked about financials for Synlait in an interview in July, Mr Penno was reticent.

He did say, however, that Synlait's 30,000 tonnes of dairy product in the year to July 31, 2009 would grow to 50,000 tonnes in the July 2010 year.

Mr Penno has declined to comment about the IPO, as has First NZ Capital – understood to be leading the offer.