In the NBR today:

A2 Milk linked to Southland processing investment

Mataura Valley Milk close to finalising transaction, says report.

By Tim Hunter

Mon, 22 Jun 2020

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A2 Milk is increasing the scale of its infant nutrition business

Speculation a2 Milk is interested in buying into Southland milk processor Mataura Valley Milk has surfaced in Australia, with a media report saying it may be one of several parties bidding for the asset.

A2 Milk, whose focus is on brand marketing, confirmed in February it was looking at investing more in the processing side, adding to its 19.8% shareholding in Synlait Milk.

“Due to the increasing scale of our infant nutrition business, the board considers it is now appropriate to assess participation in manufacturing capacity and capability to complement our existing supply chain relationships. Accordingly, we are presently evaluating opportunities to address this issue,” it said.

Mataura Valley Milk, based in Gore, is 78.6% owned by China Animal Husbandry Group, with small shareholdings owned by local farmers.

Last year, it said it was seeking a strategic investor, appointing Macquarie Capital and DG Advisory to help with the process.

According to financial statements for the year to December 2018, the company needed additional funding to continue operating.

“Current projections indicate the company will exhaust its existing bank facilities in September 2019, and needs an additional $12m in funding over the period through to May 31, 2020,” it said.

Final contender?

A report in The Australian over the weekend said a2 Milk was believed to be one of the final contenders to buy Mataura Valley Milk outright.

Mataura Valley Milk building

Mataura Valley Milk began production in August 2018 after investing more than $250m in the new factory.

Debt at balance date was $196.8m, with China Construction Bank holding security over the company’s property for loans totalling $114.5m.

According to the financial statements, the bank loan agreement requires that China Animal Husbandry Group’s shareholding not be less than 60%.

A2 Milk and Mataura Valley Milk have been contacted for comment.

A2 Milk shares closed on Friday at $20.33, valuing the company at $15 billion.

By Tim Hunter

Co-editor

Contact the Writer: [email protected]

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