Pengxin moves to expand holdings of NZ dairy with Synlait buyout
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.