Synlait Farms to sell off 13 dairy operations for $70m

Canterbury dairy business Synlait Farms is in talks with several interested investors keen on buying a majority shareholding in its 13 dairy farms, but it has yet to disclose whether it will reach its $70 million target.

The company supplies 10 to 12 per cent of the milk processed by the Dunsandel operations of Synlait Milk, a sister company, and new capital is expected to go into developing dryland sections of the 4820 hectares through surplus irrigation consents and improvements to irrigation and pastures.

Founding shareholders John Penno, Juliet Maclean and Ben Dingle have confirmed they will remain with the company should talks between possible partners be successful.

Negotiations are expected to intensify now the new year break is over, with the initial deadline for declarations of interest ending on December 20.

Synlait chairman Barry Brook said the company was in talks with several interested parties, with a selection yet to be made. Confidentiality agreements prevented names from being released and negotiations were positive.

The large farms with room to take them to full milking capacity had made them attractive to interested parties, he said.

‘‘If you were making an investment in dairy farming in New Zealand, you would be hard pressed to find a better set of factors than this land with irrigation and large-scale units and opportunity to expand and utilise further water. It’s a pretty good package.’’

The majority shareholding could yet be more than 51 per cent.

‘‘It could be significantly more. That depends on the level of capital and indebtedness of the new partner’s requirements, but the key thing is the partner will have a controlling interest.’’

Mr Brook would not disclose whether the interest had come from overseas or a local offer had been received.

Some existing shareholders were expected to leave the company, but the founders had indicated a willingness to remain.

Mr Brook said the founders wanted to take the farms to the next stage and this gave confidence and stability to the busi- ness, and would mean knowledge and intellectual property would be retained.

Synlait Milk is owned 49 per cent by Synlait Ltd, with the controlling 51 per cent stake sold to China’s second-largest dairy company, the part state-owned Bright Dairy, last year.

It paid $82m for the 51 per cent holding and that capital was used for Synlait Milk’s new infant formula plant expansion.

Bright Dairy has said it is focused on milk processing and was not interested in being involved in the farming operation.