Pengxin moves to ex­pand hold­ings of NZ dairy with Syn­lait buy­out

China Daily (Canada) - - BUSINESS - ByWANG YING in Shang­hai wang_y­ing@chi­nadaily.com.cn

Shang­hai Pengxin Group Co Ltd has won ap­proval from Chi­nese reg­u­la­tors to buy a con­trol­ling stake in a 4,000hectare dairy farm in New Zealand, part of its strat­egy to meet grow­ing do­mes­tic de­mand with im­ports.

The takeover of­fer was ex­tended to Syn­lait Farms Ltd on Nov 1, 2013. Shang­hai Pengxin will make the pur­chase through SFL Hold­ings, in which it owns a 74 per­cent stake.

In a state­ment, Syn­lait said that 99.58 per­cent of its share­hold­ers had ac­cepted the of­fer be­fore it closed on Jan 29. The trans­ac­tion will close on or be­foreMarch 11, it added.

Ac­cord­ing to me­dia re­ports in New Zealand, the to­tal of­fer price to be paid to share­hold­ers is NZ$2.22 ($1.87) a share.

“All I know is the pur­chase is in progress. There is noth­ing else to say,” said an anony­mous of­fi­cial with Shang­hai Pengxin on Thurs­day.

In 2012, Pengxin com­pleted the pur­chase of 16 dairy farms in New Zealand with a to­tal area of 8,000 ha and 16,000 dairy cows.

United King­dom-based re­search firm Min­tel Group Ltd said last year that the Chi­nese dairy­mar­ket will reach 66 bil­lion yuan ($10.8 bil­lion) by 2017.

It fore­cast that do­mes­tic sup­plies will fall short by 15 to 20 per­cent of thata­mount, driv­ing some Chi­nese dairy sup­pli­ers to in­vest over­seas.

“China’s com­par­a­tively low qual­ity and sup­ply short­age of dairy prod­ucts pushed many Chi­nese dairy com­pa­nies to gain over­seas re­sources,” said Song Liang, a dairy in­dus­try an­a­lyst.

China im­ported 1.52 mil­lion met­ric tons of dairy prod­ucts from Jan­uary to Novem­ber 2013, up 35.7 per­cent, ac­cord­ing to the Gen­eral Ad­min­is­tra­tion of Cus­toms. New Zealand was re­spon­si­ble for the lion’s share of those im­ports at 86 per­cent.

MengJie, an­an­a­lyst atChina Dragon Se­cu­ri­ties Co Ltd, said Pengxin’s deal may be in­spired by talk that China will soon an­nounce new in­cen­tives for the dairy in­dus­try. Com­pa­nies in the sec­tor are pre­par­ing for that de­vel­op­ment through ac­qui­si­tions or ex­pan­sion, addedMeng.

Shang­hai Bright Hol­stan Co Ltd, a sub­sidiary of Bright Dairy& FoodCoLtd, has de­cided to in­vest about 450 mil­lion yuan to build a demon­stra­tion dairy farm in Anyang, He­nan.

Bright Dairy & Food Co Ltd will in­vest 248 mil­lion yuan in a new demon­stra­tion dairy farm in Hei­longjiang prov­ince.

In­nerMon­go­lia Yili In­dus­trial Group Co Ltd will in­vest $50 mil­lion in Hong Kong-based dairy firm China Huis­han DairyHold­ings Co as part of its drive to se­cure milk sup­plies.

But Meng ex­pressed con­cern about the out­look for Shang­hai Pengxin, given its sub­stan­tial hold­ings in New Zealand.

She noted that New Zealand’s Fon­terra Co-op­er­a­tive Group Ltd, the world’s largest dairy ex­porter, had to re­call milk pow­der last year for safety rea­sons.

“As a mother, I now pre­fer do­mes­tic milk pow­der to im­ported brands. And for a dairy pro­ducer with low recog­ni­tion of its brand among Chi­nese con­sumers, it is too risky to pour so much money into New Zealand dairy farms,” saidMeng.

Song sug­gested it would be bet­ter for Pengxin to set up joint ven­tures in­stead of tak­ing con­trol of dairy farms. Wang Zhuoqiong con­trib­uted to this story.

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