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Bright Dairy to cede control of Synlait Milk in NZX listing

Tuesday 14th May 2013

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Chinese food giant Bright Dairy & Food will give up its controlling stake when local dairy processor Synlait Milk is listing on the stock exchange, retaining its stake without participating in the share sale.

Shanghai-based Bright Dairy is expected to keep its investment, diluting its 51 percent stake into the 40s. Other shareholders will have the opportunity to sell some or all of their shares into the initial public offer, with any remaining stake subject to escrow arrangements.

Bright Dairy emerged with a 51 percent stake in 2010, paying $82 million, after local investors gave a lukewarm response to a $150 million listing in what were still nervous times for capital markets in the wake of the global financial crisis.

Synlait Milk has appointed First NZ Capital and Goldman Sachs as joint lead managers for the proposed listing on the NZX main board, with the offer price to be set in a book build process. No details about the potential size of the IPO were given.

"It is intended that the proceeds of any offer will be used to support various growth initiatives including the construction of a new packaging plant, and to facilitate Synlait Milk refinancing its debt position to support these growth initiatives," it said in a statement.

The offer is expected to be made to the New Zealand public through NZX broker firms, and institutional investors on both sides of the Tasman and in certain other jurisdictions.

Synlait Milk processes more than 500 million litres of milk a year. In December it announced a maiden profit for the year to July 31, 2012, of $6.3 million.

Last week, Synlait Milk said it was investing $15 million to upgrade its Special Milks Drier at Dunsandel as it looks to further tap into the $15 billion a year demand for infant formula in China.

In December, chief executive John Penno talked down the prospect of a listing in the near future, despite Synlait Milk's annual report flagging plans to seek fresh capital from its shareholders to pursue "further strongly profitable opportunities."

No date has been set for the listing, though it's expected to be near the end of July or early August. That would see it come in just ahead of the next partial privatisation of a state-owned power company after this months' listing of MightyRiverPower.

Synlait Milk's announcement is the latest in a raft of technology companies signalling intentions to list, including SLI Systems, Wynyard Group and Serko. Mobile advertising company Snakk Media joined the NZAX earlier this year, while the Mad Butcher franchise has joined via a back door listing through Veritas Investments.

Last month, AMP Capital Investors (New Zealand) head of equity Guy Elliffe said there was a glut of capital raisings coming to market which would likely mop up a string of corporate and government bond redemptions.

In February, Elliffe told a client presentation the local stock exchange faces a "materially" busier year than normal in terms of capital raisings, and with demand that could see demand for a net $2 billion in extra funds on top of any dividends or redemptions.

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