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.
Murray Goulburn, which suffered a net loss of A$370 million in 2016-17, effectively put itself up for sale last month.
Australian dairy analyst Steve Spencer, of Freshagenda, told Dairy News there is a strong likelihood MG will be sold.
“We’d expect this could take six to nine months if it involves a takeover of the full MG structure,” he says.
Media report Chinese processor Yili is the latest bidder for MG’s assets, but like other foreign buyers Yili would be scrutinised by the Foreign Investment Review Board.
Any deal would likely need the backing of 90% of Murray Goulburn’s 2200 farmer suppliers under its co-op structure. So the government would be less likely to overturn a deal even if the review board had concerns, commentators say.
Other bidders are said to include listed company Bega Cheese, Chinese group Fuyuan Farming, Fonterra and Canadian heavyweight Saputo, which already owns Warrnambool Cheese and Butter.
Italian dairy titan Parmalat, Japan’s Lion, Singapore-owned Goodman Fielder and listed company A2 Milk are also said to be among those courting MG. Even Danish co-op Arla has shown interest in MG via its joint venture with Chinese company Mengniu.
Spencer says he isn’t surprised by the intense interest in MG.
“It is the largest player in the sector with strategic assets and milk supply.”
Last year MG had sales of about A$2.8 billion.
A Fonterra spokesman says the co-op plans to keep growing its business in Australia.
“Our business is in good shape and has sustainable performance, and we will look at all opportunities that make sense to continue to build a strong and sustainable business in Australia,” he told Dairy News.
“We are not going to comment on any merger and acquisition activity in the market.”
MG’s sale will be the biggest deal in the Australian dairy industry since 2013 when bidders went all out for Warrnambool Cheese and Butter. A prolonged bidding war ensued between MG, Bega Cheese and Saputo, which was the successful suitor. Even Fonterra weighed in to protect its interests, buying a strategic stake in Bega Cheese.
Investment bank Deutsche and MG are believed to be talking to would-be suitors.
