Struggling A2Milk has moved to complete the acquisition of a majority stake in rival Kiwi dairy group, Matura Valley Milk from a Chinese company that was first proposed in August. The purchase and subsequent investment in new plant will cost close to $A400 million.
In a Christmas Eve announcement to stock exchanges, A2 said it had entered into a binding agreement to acquire 75% of Mataura, which produces a number of nutritional and milk powders.
A2 hopes the deal will strengthen its ties in the Chinese market where it’s problems this year (and with the lack of Daigou buyers in Australia and New Zealand because of COVID-driven travel bans) have triggered an expected slump in revenue and profit for the year to June, 2021.
A2 last week warned the absence of Daigou buyers and the knock-on impact in new orders from China, will cost it between $NZ250 and $NZ500 million in sales revenue in the year to June next year and lower its profit margin
The Mataura stake will cost A2 $NZ268.5 million ($A250 million) and will be funded from the company’s existing cash holdings. The remaining 25% of Mataura is its current majority shareholder, China Animal Husbandry Group (CAHG).
CAHG’s parent company is the state-owned China National Agriculture Development Group, which also owns a logistics and distribution company in Shanghai which is a key partner for A2 Milk.
A2 acting CEO, Geoff Babidge said the deal with Mataura and CAHG would be vital to establishing a strong base of operations in New Zealand, along with forging a deeper bond with A2’s Chinese partners.
“MVM provides a unique opportunity to acquire a new world-class nutritional products manufacturing capability in New Zealand, alongside a highly respected China state-owned enterprise in China Animal Husbandry Group,” he said.
“We have worked closely with CAHG and MVM over recent months and have developed relationships with both teams that we are confident will provide a strong foundation for the business going forward.”
The statement from A2 said CAHG will assist A2 with regulatory affairs and market access in China, which the company has said increases the strategic value of the deal. Mataura also owns a near-new processing plant north-east of Invercargill on NZ’s South Island.
A2 plans to convert Mataura into a manufacturer of canned infant formula over the next two to three years, which will cost $NZ112 million as a blending and canning facility will need to be installed.
