Bid means business as usual for Synlait

“It’s really important to the new partner that the current management stays in place so from the point of view of change, there will be little change,” Juliet Maclean, told Dairy News.

However, a promised $20m injection into the farms should accelerate planned and wish-list developments such as Protrack in all rotaries, new milking silo and system technologies, and embedding the firm’s continuous improvement, lean manufacturing programme and culture, ‘In Sync’*.

 “[The] change there will be positive change,” stresses Maclean. “Giving us more resources to work with means I’ll be able to resource the team a little more thoroughly and that’s quite exciting.”

Unsurprisingly for a business that prides itself on its people management, staff were informed of the plans on the same day official announcements were made. Reactions were positive, says Maclean.

“They know that equity raising has been on the cards for some time and they understand the opportunities it will bring for them.” That includes a share scheme for senior staff. “If you want people to perform at a high level and be loyal to the business it’s nice to give them some involvement in the business.”

Her comments follow Synlait Farms’ announcement that a holding company, 75% owned by Shanghai Pengxin subsidiary New Zealand Standard Farm and 25% owned by Maclean and fellow Synlait founder John Penno, will make an $85.7 million takeover bid for Synlait Farms.

Shanghai Pengxin is the same firm that last year, after much public debate and a lengthy Overseas Investment Office approval process, secured the 16 former Crafar Farms in the North Island and contracted Landcorp to manage them.

Maclean, Penno and the third major founder shareholder remaining in Synlait, Ben Dingle, have made a pre-bid agreement with the holding company, SFL Holdings, to sell the 50.18% of Synlait Farms shares they control into the holding company. Dingle will not be part of the new structure and is “pursuing different opportunities,” says Maclean.

The balance of Synlait Farms’ shares are held by about 100 minority shareholders who should have the detail of the SFL offer in early November. If 90% accept the $2.10/share bid, a 31% premium to the last traded price on Unlisted, then the takeover code allows SFL to buy the remainder at the offer price without requiring agreement of the shareholders concerned.

Maclean says offering long-term shareholders an exit strategy at a good value, as she believes this offer does, has been a board objective for some time. It also meets the board’s goal to make the business “financially robust” so it can take opportunities to grow and improve, while remaining loyal to existing management.

Shanghai Pengxin’s was one of five offers received, all of which involved some overseas ownership. Maclean declined to comment on the detail of other offers, but points out New Zealand investors had their chance.

“When we did the first IPO [in 2009]… we didn’t get it away. That was an opportunity for locals to invest, but they chose not to.”

China’s Bright Dairy took a 51% stake in the processing business, Synlait Milk, in 2010 and now the farms business seems set to become majority overseas owned too. But Maclean points out Synlait has “grown and been successful with the support of overseas investment from the start,” alluding to Japan’s Mitsui shareholding from the early days.

The team and culture of the business has also been multicultural from the outset. “We’re accustomed to working with non-Kiwi-born partners…. It’s just part of our DNA.” But the possibility of Shanghai Pengxin using Synlait Farms as a training ground for Chinese dairy farmers “hasn’t even been mentioned.”

Similarly Synlait Farms operating in China is “something that’s not been discussed.” Shanghai Pengxin’s current farming interest in China is in sheep, not dairy. 

*In Sync: ‘In’ for innovation, ‘Syn’ for Synlait, and C for Continuous improvement through innovation.