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.
“There has been some concern about whether mymilk is part of the cooperative or not,” he told the Northland Dairy Development Trust annual conference.
The new subsidiary is “specifically for 5% of our milk only and not any more”. “This is quite frankly to get out there and mix it up,” says Wilson.
“Not all farmers believe in joining the cooperative. We are getting farmers particularly in Southland and Canterbury – where we’re offering mymilk – who are saying clearly, ‘no, we don’t want to buy shares, we just want to supply milk’.
“That means we lose that milk and we have assets in Canterbury and Southland that are highly efficient and can process milk more efficiently than the average plant in New Zealand.
“So where we can secure that milk, understanding its transport cost, paying less than the milk price and processing efficiently – it has to be advantageous to the cooperative.
“Mymilk is a standalone subsidiary of Fonterra.
“It only has three or four people working in it…. Its job is to secure milk and prove to us it is profitable to do so, to get out there and mix it up… with competitors instead of sitting back and losing that milk… get that in and get that asset utilisation.
“Important here is that it must be profitable for the cooperative and it will be limited to 5% of our milk.”
Announced in December, mymilk will initially invite applications from farms in Canterbury, Otago and Southland not currently supplying Fonterra, for one year contracts renewable for a maximum of five years without the obligation to purchase Fonterra shares.
At any time mymilk suppliers can apply to join the cooperative, buy shares and supply Fonterra directly.
