What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The $552 million deal is an important milestone for Fonterra following its strategic refresh.
The co-operative announced in October 2020 the sale of the farms to Inner Mongolia Youran Dairy Co, subject to anti-trust clearance and other regulatory approvals in China.
Fonterra says those approvals have now been received. The co-op poured around a billion dollars into the farms. However, the farms failed to provide a return to farmer shareholders.
Fonterra chief executive Miles Hurrell says the co-op has contributed to the development of the Chinese dairy industry by establishing these farms.
"We're pleased to now hand ownership over to Youran for the next phase of development.
"The China market is fast moving and inspires us to keep innovating. Our China team will continue with their focus on creating value from our New Zealand farmers' milk through new products, applications and close partnerships with our customers.
"As we've seen from our recent FY21 interim financial results, our China business is performing very well, underpinned by strong demand for New Zealand dairy driven by our team on the ground.
"With these foundations, we are well placed to continue to grow our Greater China Food service, Consumer and Ingredients businesses," says Hurrell.
The completion of the sale of Fonterra's 85% interest in its Hangu farm to minority shareholder Beijing Sanyuan Venture Capital Co is progressing and is expected to be completed this financial year.
