My theory is increasingly that some activity might happen between A2M and Synlait, such as A2 increasing its stake.
That isn't to say I'm a fan of the idea, but there are a few things making it likely.
Synlait is in trouble and haemorraging assets whilst A2 is cashed up and already owns 20%.
A change of ownership might have disrupted the SAMR process but that's squared away now.
It seems evident that Bright Dairy was a factor in the SAMR process, Bortolussi called out their support specifically.
A part of Synlait's woes is surely the poor terms of the supply arrangements it has with A2, which give A2 a lot of flexibility to increase or decrease inventory orders without being locked in. This dumps all the uncertainty and risk onto Synlait who must be hanging on every demand forecast update from A2M. Consolidated ownership of A2M / Synlait would at least mean they are in sync and act as one.
I even saw Keith Woodford (for those who know him) comment on a recent article somewhere that he reckons A2 should buy Synlait. Now this article, 'Could A2 Milk be eyeing up a bigger stake in Synlait Milk?' in Businessdesk NZ, which I can't read since its behind a paywall.
If the market has got wind of it, it might explain the SP lately, since no one likes the idea of A2M moving to a more capital intensive business model, even if there is some logic to it. IMO it will probably be joint A2 and Bright Dairy ownership.
A2M Price at posting:
$5.23 Sentiment: Buy Disclosure: Held
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