A2 - keen to build infant-formula manufacturing capacity

A2 - keen to build infant-formula manufacturing capacity

New Zealand-based dairy and infant-formula group A2 Milk Co. is seeking to acquire a controlling interest in local peer Mataura Valley Milk (MVM).

In an announcement this morning (21 August) to the Australian Securities Exchange, A2 said it has entered into exclusive due diligence with MVM and has made an offer to acquire a 75.1% interest in the company, for approximately NZ$270m (US$176.2m).

A2 said the arrangements are supported by MVM's current majority shareholder, China Animal Husbandry Group (CAHG), which would retain a 24.9% interest if the deal is concluded successfully.

CAHG is a wholly-owned subsidiary of China National Agriculture Development Group, which is also the parent company of A2's strategic partner in China, CSFA Holdings Shanghai Co. (China State Farm).

A2 said it is keen to participate in manufacturing at MVM's facility in Southland, New Zealand.

Its interim CEO, Geoff Babidge, said: "As previously announced, due to the increasing scale of our infant-nutrition business, we have been assessing participation in manufacturing capacity and capability. 

"The potential investment in Mataura Valley Milk's recently commissioned facility, alongside China Animal Husbandry Group, aligns with this strategic objective as we look to complement and build upon our current strategic relationships with Synlait Milk and Fonterra Co-operative Group, which remain in place. 

"Our intention would be to invest further to establish blending and canning capacity at Mataura's facility to support the establishment of a fully integrated manufacturing plant for infant nutrition."

The announcement has prompted the aforementioned Synlait to make its own announcement to the Australian exchange, on which it too is listed.

Seeking to reinforce the stability of its own relationship with A2, the New Zealand infant-formula maker said: "Synlait and the A2 Milk Company have a long-standing, strong and complementary partnership. It is a partnership that continues to strengthen as both companies grow together. 

"Synlait is committed to our relationship with the A2 Milk Company, which is built on an exclusive long-term infant-formula supply agreements for China, New Zealand and Australia.

"Synlait is well positioned to continue to support and enable the A2 Milk Company's growth aspirations via its highly integrated infant formula manufacturing capabilities that meet the high standards in China, the world's largest infant-nutrition market."