Media Updates, page-13767

Currently there are lots of speculation about what will/might happen to Synlait. Most are expecting heavily discounted CR, who and at what degree is going to participate, some talking about possible takeover or bankruptcy and fire sale, etc. assets sale to cover debt seems like not an option anymore. I personally would be extremely happy if A2M can takeover Dunsande. But is it possible? Well, lets see how this can play out.
In the order which I think is most likely
1) Synlait will be able to unload Dairyworks or some other nonprimary assets to cover debt. Time is running out but if they can convince debtholders that the sale is imminent I'm sure they could get an extension for another 3-6 months. This will make everyone and especially Synlait and Bright Dairy very happy. A2M will be happy but at lesser degree as they still will have to deal with arbitration and other existing disagreements
2) CR. This one is not as controversial as some might think. First of all, at what price per share it will be issued is absolutely irrelevant. What is relevant the amount Synlait want to raise, we are talking about Bright Dairy (BD) and A2M here. If Synlait wants $200mil, A2M will contribute ~$40mil and BD ~$80mil to maintain share of their holding in the company. Both of them would have to subscribe to 100% of their entitlements. Why 100%?
BD and Synlait have special governance agreement (see IPO documentation), which allows BD to have 4 directors on the board and effectively control the company. From what I see BD never bought or sold any shares on the market since it become 51% owner in 2010. Its holding was reduced to 39% when company went public in 2013 because they did not participate but agreed to reduced holding in exchange to that special governance agreement. And they 100% participated in 2020 CR to maintain their 39% holding. All that indicates that so far they were not interested (or were unable) in taking over but wanted full control. Now, according to that agreement if BD's holding fall below 37% or increase above 50% that agreement will be automatically canceled and revert to a standard one. In that case they will lose control of the company. I highly doubt they will want that. Plus, if their holding increase above 41% they also would have to make formal takeover offer. So, if Synlait will go with CR their only option is 100% participation.
As for A2M it's very simple they will want to maintain their holding at ~20% to be able to block any attempt of takeover or other foul play. They won't be able to take more unless BD agreed, which is unlikely.
3) Takeover. With neither BD nor A2M will be able to make that move alone as each has blocking stake, the most possible scenario is some sort of partnership/joint venture between them to take over Synlait to take it private. I know that many have that theory that BD is evil and can crush A2M as an ant, etc. but the reality is BD is here to do business and secure dairy supply for China, not to cause problems. If they try anything like that a) loosing biggest customer won't be a good start to full ownership b) reputation risk and c) I doubt they will be able to continue business here, which is their main purpose.
4) Dunsande sale to A2M and Synlait/BD keeping the rest. I guess it's possible, but very unlikely in my view.
5) Bankruptcy/insolvency with asset's fire sale. With two major shareholders who have vested interests and plenty of resources I'll be highly surprised.
Just want to reiterate that this is purely my view.