Costly Utterances
OPINION: A costly out-of-court settlement has hit dual-listed processor a2 Milk Company.
a2 Milk Company is paying $282 million for Yashili’s Pokeno facility. At the same time, a2MC is offloading its 75% stake in Mataura Valley Milk to Open Country Dairy for $100m.
China Animal Husbandry Group’s (CAHG) is also selling its 25% shareholding in Mataura to Open Country.
a2 MC managing director David Bortolussi says the company intends to invest $100 million in a multi-year capital investment programme to increase capacity and enhance capability at the new a2MC Pokeno site with plans to employ more than 100 additional people over time, providing significant development opportunities to current and future team members.
He says the acquisition secures opportunity for greater market access to the attractive $23 billion China Label Infant Milk Formula (CL IMF) market through control of two highly sought after product registrations for CL IMF that can be amended to expand the a2 branded portfolio with the potential of a third registration over time.
Bortolussi says the new a2MC Pokeno site is a world-class fully integrated nutritional manufacturing facility with proven IMF experience including the current production of a2MC’s new English label products.
The sale of Mataura Valley Milk optimises asset footprint and capacity utilisation while maintaining access to high quality A1 protein free ingredients from the site through a commercial supply agreement, he adds.
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Mataura Valley Milk has struggled to return a profit for a2MC.
Open Country chief executive Mark de Lautour says the acquisition would give the company the ability to commit further to the Southland and South Otago regions.
“The deep South is an important region for Open Country and is an area we have previously announced as targeted for significant capital investment. The acquisition of Mataura Valley Milk highlights our commitment to the South.
“This site is a strategic investment for Open Country given its advanced, high-tech design. Its capabilities give us the opportunity to produce a different array of higher-value products that will complement our current Awarua site product range.”
Part of the acquisition agreement includes a supply arrangement with a2 Milk Company whereby the Mataura Valley Milk site will continue processing A1 protein free milk to produce A1 protein free milk powder. Milk supply agreements with current farmer suppliers remain unchanged.
“We look forward to working with the team at Mataura Valley Milk to fully utilise the site’s capability. In doing so, there will be an exciting opportunity for new farmers to add to the existing supply group and join the wider Open Country family of farmer suppliers,” says de Lautour.
Next week, de Lautour and Open Country’s chair, Laurie Margrain will join Bortolussi to meet with Mataura Valley Milk staff and current farmer suppliers.
“We are all very much looking forward to meeting everyone and sharing our excitement around this purchase,” he says.
“At Open Country we are focused on ensuring we are in a position to provide dairy farmers with genuine choice. Choice that benefits farmers, our staff and the New Zealand dairy industry as a whole. This has flow-on benefits to the New Zealand economy and the communities in which we operate given our 100% New Zealand ownership.”
Founded in 2001, Open Country is now New Zealand’s second largest milk processor and the world’s second largest exporter of whole milk powder. It currently has six production sites across New Zealand and a head office location in Auckland.
