During a special meeting held at its Dunsandel headquarters, smaller shareholders agreed to inject nearly $218 million into the company. This capital infusion will come from Chinese company Bright Dairy and The a2 Milk Company.
Bright Dairy will be contributing $185 million by purchasing new shares at 60 cents each, thereby increasing its stake to just over 65%. The second largest shareholder, a2 Milk, will be investing close to $33 million at 43 cents per share to maintain its ownership stake of just under 20%.
Prior to the vote, chairman George Adams had cautioned that insolvency proceedings would be initiated if the equity raise did not succeed. As a result of this investment, minority shareholders will see their holdings decrease from about 41% to 15%, though the value of their shares will rise due to the additional funding.
In addition to the equity raise, shareholders were also asked to vote on Synlait’s settlement with a2 Milk and amendments to the company’s constitution. The success of the equity raise is contingent upon the refinancing of Synlait’s bank facilities.
For the equity raise, a2 Milk settlement, and bank refinancing to move forward, all three components must be completed by Tuesday, according to the company’s expectations.
Chairman George Adams described the outcome of the vote as a “watershed” moment for Synlait, offering a positive outlook for the company, its investors, farmer suppliers, customers, suppliers, and employees.
Julia Zhu, a director appointed by Bright Dairy, emphasized the Chinese company’s commitment to safeguarding Synlait’s long-term value, strengthening the company, and rebuilding confidence among farmer suppliers in the years to come.
The voting results showed overwhelming support, with over 94% in favor of the share issue to Bright Dairy at 60 cents per share, nearly 96% for the a2 Milk share issue at 43 cents, and just under 97% for the amendment of the company’s constitution.
The repayment of listed bond holders will be facilitated by the capital injection. The New Zealand Shareholders’ Association acknowledged the necessity of the capital raise for Synlait’s balance sheet, though they expressed concern over the impact on minority shareholders.
As part of the restructuring, Synlait will cease milk processing at its Pōkeno plant, with Open Country taking over the collection and processing of milk from Synlait’s 54 farmer suppliers in Waikato. The Pōkeno facility will focus on plant-based proteins, while the Dunsandel plant will remain the central hub for dairy operations.
While there are no active plans to seek a buyer for the Pōkeno site, Synlait may consider compelling offers. The company is set to release its full-year financial results for the fiscal year ending in July on Monday.
tim.cronshaw@alliedpress.co.nz
