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A2 deepens relationship with Synlait Milk buying 8.2% stake for $47.9M

Friday 3rd March 2017

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A2 Milk Co has bought an 8.2 percent stake in Synlait Milk at a small premium, building on an existing supply agreement between the milk marketer and dairy processor. 

Sydney-headquartered a2 bought 14.6 million shares at $3.275 apiece from Dutch dairy processor Royal FrieslandCampina, a 5.6 percent premium to yesterday's closing price of $3.10 and 3 percent premium to the one-month volume weighted average price. The Dutch company, which counts Fonterra Cooperative boss Theo Spierings as alumni, took a stake in Synlait when it went public in 2013 buying shares at $2.20 apiece in the float, but signalled a change of tack in the investment when it didn't acquire further stock in last year's capital raising. 

"The investment in Synlait builds upon our existing commercial ties with an innovative dairy processing company," a2 managing director Geoff Babidge said in a statement. "As Synlait’s preferred customer, this investment demonstrates a2MC’s commitment to supporting our major contractor and we see this as a long term holding."

A2 and Synlait signed a supply agreement in 2012 to support the milk marketing firm's plans to launch infant formula sales into China, and inked a new deal last August providing for increased scale if market demand warranted it. 

The milk marketing firm said the Synlait investment provided certainty for its medium-term plans, with the supply agreement still at the heart of their relationship, and that it had no plans to lift its stake, saying the company "believes its shareholding will provide stability to Synlait’s capital structure as it grows". 

A2 shares last traded at $2.37 and have gained 32 percent over the past 12 months.

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