The company released details of its initial public offering (IPO) this week which, in addition, will include a secondary sell-down indicatively set at $45 million. The indicative share price is $2.05-$2.65. Trading is expected to begin on the NZX on July 23.
Synlait Milk is 49%-owned by Synlait and 51%-owned by Chinese food giant Bright Dairy and Food Co. Ltd.
Bright Dairy, which invested in the company in 2010 at a cost of $82 million, elected not to sell any of its shares into the offer and would retain its current shareholding.
Its percentage holding was expected to reduce post-IPO to about 40%, dependent on the final price of the shares offered.
In the prospectus, chairman Graeme Milne said the new capital raised would be used to retire debt and it would allow the company to access further debt finance to be used to support the construction of a lactoferrin extraction and purification facility, a blending and consumer packaging plant, a dry store, a quality testing laboratory, a butter plant and a spray dryer.
Although the company was confident about its business strategy and its ability to add value, the international dairy market was characterised not only by growth, but volatility. Underlying prices moved rapidly in response to both supply and demand factors, Mr Milne said.
As an exporting company, virtually none of its sales were made in New Zealand dollars and so it was exposed to foreign exchange rate risk.
That and other factors meant that, despite risk management strategies, returns from the investment would vary, he said.
Chief executive and co-founder John Penno said the business had grown quickly since its launch in 2005 and it was ready to ''accelerate'' the development of its promising infant formula and nutritional products business. Revenue was forecast to grow from $112 million in 2009 to $524 million in 2014. Current capacity of the manufacturing site was to produce 95,000 metric tonnes of products and, on completion of the growth initiatives, it would be capable of producing about 140,000 tonnes.
Although the company expected to complete those initiatives by mid-2015, it expected the full financial benefits would not be reflected in its financial results until 2017 and beyond.
Yesterday, the Cushing family's farming group Rural Equities Ltd announced its two Canterbury dairy farms would supply Synlait Milk from the season which started on June 1, instead of Fonterra. That followed a review of the milk processing options for the company's six dairy farms, which include two in Southland.
The processing changes allow milk to be supplied to Synlait without owning Synlait shares. Rural Equities also participated in the recent Fonterra shareholders' supply offer which enabled a proportion of shares to be sold to the Fonterra Shareholders' Fund.
Both that and the Synlait initiative have enabled it to divest about half of its Fonterra shareholding (789,262 shares). The sale of the Fonterra shares realised about $6 million.
Rural Equities Ltd has entered into an unconditional contract for the sale of the Blairmore property, a sheep, beef and deer grazing farm, to a neighbouring farmer in Central Otago for $3.45 million. Blairmore has been owned by the group for more than 24 years.
