Suitors weigh options as A2 Milk prepares to report earnings

A2 Milk chief executive David Bortolussi. Picture: Britta Campion

It may not just be investors looking on at A2 Milk’s annual results on August 26 – suitors may be paying careful attention as well.

There has been talk out of Europe that Swiss multinational Nestle has been keeping a close eye on the company, but most think a suitor will only move after A2 reports its annual results.

A2 has a market value of about $4.35bn.

The valuation has more than halved in the past year as sales to China come off the boil.

Nestle is an expert in powdered milk products and the largest player in milk products internationally.

It has partnerships with major dairy producers around the world.

 

Nestle purchased the Pfizer infant formula business some time ago, but had to sell the Australian operation due to antitrust issues.

Both Nestle and Kirin’s Lion are understood to have looked at A2 in the past, but the price was too high.

The opportunity for a global group is to take A2’s technology into other supply chains and brands in other markets.

One observer says that if Nestle thinks it can be a differentiator in powdered milk or infant formula it will look at A2.

There has been talk that A2 Milk, which produces milk with only the A2 beta-casein, has been on the radar of potential suitors this year.

 

The daigou trade between China and Australia sent A2 shares soaring before the pandemic – students and travellers bought product in Australia and sent it home to China and more organised traders dealt with producers like A2 directly. But travel restrictions have limited sales into China, as have the trade tensions with Australia.

A2 was a takeover target for the recently challenged Freedom Foods and an unnamed international dairy company in 2015, when it was capitalised at only $325m.