Synlait Milk is seeking to raise NZ$200 million, including a NZ$20 million share purchase plan (SPP), as it secures a new manufacturing supply agreement with an undisclosed multinational customer.
The equity raising will go towards the customisation of its Pokeno and Auckland sites for processing and packaging equipment to service its new multinational customer, as well as “provide more financial headroom” during the COVID-19 pandemic.
Around NZ$70 million of capital expenditure is expected to be allocated to the sites over the next two years as part of the agreement with an “established, global category leader”, with Synlait manufacturing, blending and packaging nutritional products, including plant-based products. Commercial production is projected to begin in mid-2022.
“Our team has been working on this agreement for some time. It recognises our world class technical and quality capabilities and utilises our integrated manufacturing chain. We are pleased to welcome this important multinational customer to Synlait’s network,” said Synlait chair Graeme Milne.
Synlait CEO Leon Clement said the strategic partnership will give the company a broader market and category exposure in the Asia Pacific region.
“Asian markets are experiencing strong sector growth as consumers seek nutritional products that support better health. Synlait is excited to play a role in this journey. This is a significant step forward for us as we genuinely diversify our customer, category and geographic reach,” said Clement.
The New Zealand dairy business announced on 11 November it had fully subscribed the NZ$180 million underwritten placement, which was “strongly supported, attracting bids well in excess of the NZ$180 million”, at the fixed price of NZ $5.10 per share.
It represents a discount of 14 per cent to the last trading price of NZ$5.93 on 9 November.
“It is expected that approximately $167.2 million of the $180 million placement will be settled at that time, with the balance representing a portion of the new shares allocated to [shareholder] Bright Dairy Holding Limited,” the company said in its statement.
“Those additional shares allocated to Bright Dairy are expected to be settled on 1 December 2020, contemporaneously with the issue of new shares under the SPP.”
The NZ$20 million SPP opened today (13 November) for eligible existing Synlait shareholders with a registered address in New Zealand or Australia, giving them the opportunity to each subscribe for up to NZ$50,000/A$47,000 worth of new Synlait shares.
The SPP will close on 25 November, while the settlement of the placement is expected to be completed on 17 November for the ASX and 18 November for NSX.
Synlait sells Deep South to Talley’s
The sale of ice cream brand Deep South, part of the Dairyworks portfolio of brands, was completed this week for an undisclosed sum to New Zealand agribusiness Talley’s.
Synlait completed its acquisition of Dairyworks in April for NZ$112 million, with Clement stating the divestment of the Deep South brand and its operations “reflects Synlait’s intention to increase value in with our strategy”.
Dairyworks CEO Tim Carter said the sale will allow the business to focus on its core business and explore new market opportunities.
“Dairyworks is going through a period of rapid expansion in our core categories of cheese, speciality cheese, yoghurt and convenience butters,” said Carter.
“While Deep South is a successful part of our current portfolio, ice cream is not our core business. The brand has strong growth potential for a business more focused on ice cream.”
