A2 Milk in Christmas Eve deal to buy Mataura Valley infant formula plant
It’s been a rollercoaster fortnight for A2 Milk with the trans-Tasman company announcing a Christmas Eve deal only weeks after cutting its earnings outlook.
DAIRY juggernaut A2 Milk has revealed a Christmas Eve acquisition of New Zealand dairy company Mataura in a move to shore up the lucrative Chinese market.
Management at the trans-Tasman corporation told shareholders today it had entered into a binding agreement to acquire 75 per cent of Mataura Valley Milk.
The stake will cost A2 $NZ268.5 million (around A$250 million) and will be funded from the company’s existing cash reserves.
Current majority shareholder, China Animal Husbandry Group, will retain the remaining 25 per cent of Mataura. The group is a Chinese Government-owned entity that also operates a Shanghai distribution company.
In a statement, A2 chief executive Geoff Babidge said the deal with Mataura and CAHG would not only improve its position in New Zealand but give it a better footing in the Chinese marketplace.
“(Mataura Valley Milk) 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,” Mr Babidge 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 acquisition needs to be given the green light by the New Zealand Overseas Investment Office, with a decision expected midway through 2021.
The announcement comes less than a fortnight since A2 management said its full year group revenue would come in between $NZ1.4 billion (A$1.3 billion) and $NZ1.6bn (A $1.5 billion).
It had previously been expecting to get up to $NZ1.9bn (A $1.8 billion).
On the back of the December 18 announcement, the company’s shares fell 24 per cent to close at $10.14 later that day, bringing the market value down to $7.5bn.
Today the share price was back up around $10.95, receiving a small boost from the Mataura announcement.
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