A2 Milk’s bid wins backing

Analysts say A2 milk’s potential acquisition of a majority stake in NZ-based Mataura Valley Milk would help the dairy giant better manage its complicated relationship with China while growing margins.

The $NZ270m ($246m) cash bid, revealed by DataRoom on July 21, would give A2 a 75.1 per cent stake in Mataura, with Chinese government-owned China Animal Husbandry holding the remainder.

Citi said the acquisition could give A2 “an increased ability to comply with evolving Chinese regulations longer term”, which could be vital as geopolitical tensions between Australia and China rank as one of the company’s largest risk factors.

Citi said the acquisition would improve A2’s bargaining power with existing suppliers, boosting margins, while the increased manufacturing capacity could improve product development.

Elsewhere, TPG Capital has completed its exit from poultry producer Inghams Enterprises, offloading a 9.9 per cent interest before the market opened on Monday.

JPMorgan worked on the sale of 36.7 million shares at $3.32 each.

ADDITIONAL REPORTING:

LACHLAN MOFFETT GRAY