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 deal, stitched together in the early hours of this morning in France where the family-owned business is headquartered, proposes Fonterra’s global consumer business (excluding Greater China) and consumer brands; the integrated foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business change hands for $3.845b.
There is potential for a further $375 million increase in the sale price from the inclusion of the Bega licences held by Fonterra’s Australian business, which if progressed would take the headline enterprise value of the transaction up to $4.22 billion.
For the sale to go ahead, 50.1% of voting Fonterra farmer shareholders must vote yes.
McBride says a series of webinars klick off this afternoon where the co-op will brief farmer shareholders.
Fonterra directors and management will also use their roadshow meetings, scheduled after its annual result announcements next month, to sell the proposal. McBride expects strong farmer interest at the meetings.
“Often with farmers when you have a good set of results, you don't get a good turnout, but I think we're going to get one this time,” he says.
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He also expects an easier round of consultation compared to its capital structure in 2021.
“When I compare this consultation to capital structure, I'd say this would be an easier road to go down, so we're looking forward to it.
“We require 50.1% approval to go ahead with the sale, but we're looking for much more than that, and we're looking for a really high turnout. That's an important part of this.”
McBride says since the announcement this morning, he has received a flurry of texts and messages - all positive.
“They've obviously heard about some of the value that's been bandied around. Now they've seen a real number, so I think it's starting to hit home in terms of now they have a decision to make.”
Fonterra farmers are likely to meet at the end of October to vote on the proposal.
