In a move that will build its infant nutrition capacity and capabilities, a2 Milk Company is looking to take a 75.1 per cent stake in New Zealand dairy nutrition business Mataura Valley Milk (MVM) for around $245 million (NZ$270 million).
The a2 Milk Company more than doubled sales of its infant formula products into China in FY20. CEO Geoff Babidge the copmany had been assessing participation in manufacturing capacity and capability due to the increasing scale of the company’s infant nutrition business.
The non-binding indicative offer is based on the enterprise value of NZ$385 million, with MVM agreeing to enter exclusive due diligence to negotiate details in the deal.
MVM’s current majority shareholder China Animal Husbandry Group will retain a 24.9 per cent interest alongside a2 Milk as part of the terms.
“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,” said Babidge.
“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.”
The deal is expected to be settled towards the end of FY21 for a2 Milk and funded entirely from existing cash reserves, pending further due diligence, negotiation of definitive agreements, and requisite regulatory and third-party approvals.
Earlier this week, a2 Milk released its FY20 results, with its total revenue increasing nearly a third on the previous year.
