The a2 Milk Company (a2MC) is in discussions to acquire a 75% stake in New Zealand’s Mataura Valley Milk (MVM).

The bid follows a2MC initially approaching MVM with the view of sharing their manufacturing facilities in Southland, New Zealand. However the company this morning announced it had made a non-binding NZ$270 million (AUD$245 million) offer for the majority stake. Discussions are ongoing and MVM is providing the a2MC with due diligence before it proceeds further.

Currently the majority shareholder for MVM is China Animal Husbandry Group (CAHG), who has indicated it will support the deal and retain a 24.9% interest. CAHG is a subsidiary of China National Agriculture Group, the parent company of a2MC’s strategic partner in China, CSFA Holdings Shanghai.

Outgoing a2MC interim CEO Geoff Babidge said the move was in line with their plans to increase production of their infant nutrition lines.

“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,” Mr Babidge said.

“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 deal is subject to due diligence, negotiation and regulatory and third party approvals and should it proceed, is expected to be finalised by the end of a2MC’s FY21.

The deal will be funded from existing cash reserves. The company earlier this week announced its bumper FY20 results, reporting a revenue increase of 32.8% to $1.73 billion. As well as a group infant nutrition revenue increase of $1.42 billion, also up by a third (33.8%) and growth in China label infant nutrition, sales having doubled to $337.7 million, following an expanded distribution into more than 19,000 stores.

a2MC also recently announced David Bortolussi as its new Managing Director and CEO. Mr Bortolussi will commence the role early next year and will take over from outgoing Mr Babidge, who has been in the role in on interim basis since December, 2019.

Mr Bortolussi has experience in Asian sourcing markets and in building brand distribution partnerships in China and a2MC Chairman David Hearn said he would lead the business through their next growth period. 

“The a2 Milk Company is going through a period of continued strong growth in dynamic markets and David’s skill-set and comprehensive strategic and operational experience will serve the company well. I am looking forward to working with David as we navigate these challenges together with the board and management team.”

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