A2 Milk attracts takeover interest by two unnamed parties, shares jump 23%

Monday 22nd June 2015

A2 Milk Co, the dual-listed milk marketing company, has received an expression of interest from two associated trade parties keen on taking over the company, which may force the firm to shelve a planned capital raising. The shares jumped to an 11 month high.

The parties have requested confidentiality and warned their expression of interest could be withdrawn if their names become public, A2 Milk said in a statement. The shares climbed 23 percent to 70 cents, the highest level since July last year.

The proposal is subject to a number of conditions including due diligence, exclusivity, no material adverse change in the company’s affairs, New Zealand Overseas Investment Office approval, and no change in the number of shares on issue.

“The last condition is particularly relevant as the company was well advanced in planning for an equity raising,” the company said.

A2 Milk’s board is seeking further information in order to evaluate the proposal before updating the market and said no further comment would be made at this time.

The single biggest shareholder in the company is Australian based Freedom Food Group with 19.14 per cent, which increased its stake this month. First NZ Capital and Milford Asset Management also both gave notice of substantial shareholdings this month.

When A2 Milk listed on the ASX earlier this year it didn’t include a capital raising despite a launch into the US market with fresh milk which is budgeted to cost around US$20 million over the next three years.

Earlier this month A2 Milk said it was suing the Australian Broadcasting Corporation alleging misleading and deceptive statements in advertising its consumer affairs programme, The Checkout.

A2 Milk's Australian subsidiary has lodged actions in the Federal Court in Sydney after the public broadcaster promoted a segment that called the company's scientific claims "bogus". A2 Milk claims this was a breach of the Competition and Consumer Act. ABC rejected the suggestion that the matters A2 Milk had complained about involved misleading or deceptive conduct.

The company markets its products as potentially being beneficial for people who suffer intolerance to the naturally occurring A1 protein in milk, including bloating and stomach pain. A2 Milk has captured some 9.3 percent of the Australian fresh milk market by selling milk that only has A2 protein.

The stock debuted on the ASX at 55.5 Australian cents, and recently traded at 51 Australian cents.

BusinessDesk.co.nz

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