The a2 Milk Company eyes majority stake in Mataura Valley Milk for US$176m

NEW ZEALAND – The milk and infant formula products company, a2 Milk has made a non-binding indicative offer of around NZ$270 million (US$176.41 million) for a controlling stake of 75.1% in Mataura Valley Milk (MVM), a New Zealand dairy nutrition business.

Through the offer a2 Milk will explore options of manufacturing at MVM’s facility in Southland, New Zealand.

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Mataura has reportedly granted a2 Milk a period of exclusivity to conduct due diligence for the potential deal and to negotiate definitive transaction documentation.

The exclusivity arrangements are supported by MVM’s current majority shareholder, China Animal Husbandry Group (CAHG), which would retain a 24.9% interest in MVM alongside a2MC under the terms proposed.

CAHG is a wholly owned subsidiary of China National Agriculture Development Group, which is also the parent company of a2MC’s strategic partner in China, CSFA Holdings Shanghai, Co., Ltd. (China State Farm).

Chief Executive Officer, Geoff Babidge said, “As previously announced, due to the increasing scale of our infant nutrition business, we have been assessing participation in manufacturing capacity and capability.

“The potential investment in Mataura Valley Milk’s recently commissioned facility, alongside China Animal Husbandry Group, aligns with this strategic objective as we look to complement and build upon our current strategic relationships with Synlait Milk and Fonterra Co-operative Group, which remain in place.

“Our intention would be to invest further to establish blending and canning capacity at Mataura’s facility to support the establishment of a fully integrated manufacturing plant for infant nutrition.”

According to a2 Milk, the discussions with MVM are ongoing and remain incomplete, with any potential transaction subject to further due diligence, negotiation of definitive agreements, and requisite regulatory and third-party approvals.

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Any transaction that results from the current discussions is expected to be settled towards the end of a2MC’s FY21 year and would be funded entirely from existing cash reserves.

The announcement comes six months after a2 Milk entered into an exclusive licensing agreement with Agrifoods Cooperative for the production, distribution, sale and marketing of a2 Milk branded liquid milk for the Canadian market.

The arrangement will give the New Zealand-based milk processor the ability to leverage the brand development work it has already undertaken in North America and expand into the Canadian market.

Under the arrangement, The a2 Milk Company will provide Agrifoods with access to its IP and marketing assets as well as its proprietary systems and know-how relating to the sourcing and processing of a2 Milk brand.

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