Cheyne Gillooly appointed CEO of NZ Young Farmers
This morning, NZ Young Farmers (NZYF) has announced that Cheyne Gillooly will take over as its chief executive in June.
Under the deal, Bright Dairy of China, which currently owns 39% of Synlait will end up owning almost two-thirds of the listed company. The a2 Milk Company (a2MC) will retain its 19.83% stake. Capital raised will be used to reduce debt.
The recapitalisation will require approval at a special shareholders meeting scheduled for September 18 at Synlait’s Dunsandel factory.
Synlait says the equity raise will only complete if it does so concurrently with the refinancing of its bank facilities. The equity raise, the recent dispute settlement with a2MC, and the bank refinancing are inter-conditional and therefore must all be approved and occur around the same time or not at all.
Synlait says completion of all three components is expected on 1 October 2024.
Synlait chair George Adams says the equity raise is critical for Synlait’s future.
“We followed a rigorous process, which included taking independent expert advice, to consider a range of options under the circumstances Synlait is facing,” he says.
“If the resolutions are not passed, it’s likely Synlait would need to cease trading and initiate a formal insolvency process. We are particularly grateful for the continued support of our two major shareholders, Bright Dairy and The a2 Milk Company. Their investment demonstrates their deep commitment to Synlait’s future,” says Adams.
Shareholders are being asked to approve ordinary resolutions to issue $217.8 million of new equity capital by way of:
- a $185 million issue of shares to Bright Dairy Holding at an issue price of $0.60 (a 100% premium to the closing price of Synlait's shares on the NZX Main Board on 15 August 2024 (which was the last undisturbed share price prior to announcement of the settlement with The a2 Milk Company and its support of Synlait's equity raise).This will increase Bright’s shareholding in Synlait from 39.01% to 65.25%.
- a $32.8 million issue of shares to The a2 Milk Company (a2MC) at an issue price of $0.43 (a 43% premium to the closing price of Synlait's shares on the NZX Main Board on 15 August 2024). a2MC will retain its 19.83% stake.
Synlait warns that if either resolution for the respective placements does not pass, the placements, the settlement with a2MC and the bank refinancing would not complete and Synlait would be unable to repay debt and reset its balance sheet.
“In this situation, Synlait would likely need to cease trading and initiate a formal insolvency process unless it were to become clear that further support would be forthcoming from its existing banks.”
However, both Bright and a2MC have announced their support for the recapitalisation plan.
Adams says the board acknowledges the strong support retail shareholders have provided to Synlait, especially with the recent approval of the $130 million shareholder loan.
“We are extremely grateful for this. However, the selected equity raise structure provides the greatest certainty of reducing Synlait’s debt in the shortest timeframe and at a more favourable price than alternative structures.
“This is critical to resetting our balance sheet and will hopefully reward all shareholders for their long-term and loyal support as we work to restore confidence in our company.”
