Wednesday 21st February 2018
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A2 Milk Co shares jumped 25 percent, making the milk marketing firm New Zealand's biggest listed company on a deal that will give it backing from Fonterra Cooperative Group.
The stock gained $2.31 to $11.60, valuing a2 Milk at $8.47 billion, toppling Auckland International Airport at $7.75 billion, Fisher & Paykel Healthcare at $7.37 billion and Meridian Energy at $7.29 billion. The spike underpinned the S&P/NZX 50 index, which gained 1.5 percent to 8,215.63 as at 2.35pm.
A2 unveiled a strategic partnership with the world’s biggest dairy exporter agreeing to exclusively supply a2 with A1 protein-free milk products in bulk powder and consumer packaged forms, in exchange for an exclusive licensing agreement to produce, sell and market a2 branded fresh milk for end sale in the New Zealand market. They'll set up an A1 protein free milk pool in Australia and Fonterra also gets exclusive supply rights for some products in new markets for a2 in South East Asia and the Middle East up to a specified volume.
"It was a pretty significant announcement for a2 and shows their growth can move by a lot quicker than past opportunities with Synlait Milk," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "The Australian investors in particular just like this company."
Synlait shares sank 11 percent to $6.31, having followed a2 higher through 2017 on expectations the close supply arrangement would see the milk processor benefit from the growing demand for the marketing firm's branded products.
"Investors in Synlait obviously through with the connection between the two, Synlait would have to keep up," Williamson said. "This changes things."
Units in the Fonterra Shareholders Fund gained 0.8 percent to $6.05.
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