Strategically speaking the 20% stake is all they need to prevent...

Strategically speaking the 20% stake is all they need to prevent any takeover of SM1 by a party that doesn't align with their interests.

They also have the influence and negotiating power that comes with being Synlait's largest customer, whilst at the same time having a pathway less reliance on Synlait through MVM.

The more ownership of Synalit they have, the more they share in the exposure to risks and costs that are currently borne disproportionately by Synalit.

So arguably the current level of ownership strikes the balance between having enough control to guarantee supply but not so much control that it would adversely impact margins.

Having said all this, presumably there would be SOME market valuation for SM1 where this calculation might change (if SM1's SP keeps dropping). Particularly if it means they immediately gain control of their own China label registration. But it is hard to see why the main stakeholder (Bright Dairy) would give up its holding. It would also cost them probably their entire capital reserve to complete a 100% takeover. So even if the justification was there, it's still not feasible IMO.

EDIT: Also as for a smaller increase in their holding, I'd argue this doesn't really change anything in terms of their influence. 20% is meaningful whereas 25-30% makes no difference and requires other substantial holders selling.