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Synlait Milk to buy Dairyworks for $112m

Friday 25th October 2019

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Synlait Milk announced the conditional purchase of South Canterbury’s Dairyworks for $112 million, subject to Overseas Investment Office approval.

If approved, Dairyworks will operate as a stand-alone business under the Synlait umbrella, with its chief executive Tim Carter, reporting to Synlait chief executive Leon Clement.

“The acquisition allows us to get closer to consumers, a key part of our long-term strategy,” Synlait said. 

Synlait says it has sufficient bank facilities in place to fund the acquisition and, given it is subject to OIO approval, payment is not expected until sometime in the first quarter of 2020. The purchase price represents about 7.5 times earnings before interest, tax, depreciation and amortisation, based on the last twelve-months earnings, it said. 

“This is an exciting opportunity for Synlait. This business is a great strategic fit for us and an important step in growing our presence in the everyday dairy category,” said Clement. 

“Opportunities exist in both businesses to streamline supply chains and enhance our competitiveness. It gives us the ability to optimise how we process milk solids and get the most value from our supply of milk.” 

Dairyworks is based in Hornby, Christchurch and is approximately 37 kilometres from Synlait’s Dunsandel site.

It specialises in the processing, packaging and marketing of dairy products including cheese, butter, ice cream and milk powder.

It markets its products across New Zealand’s two supermarket groups and has a “growing relationship” with Woolworths, which owns New Zealand's Countdown chain, in Australia. It also has strategic customers in the foodservice, quick-service restaurants and export channels.

According to Synlait, it supplies nearly half of New Zealand’s cheese and a quarter of its butter. It has a 9 percent market share in ice cream and a 19 percent market share in milk powder. Its brands include Dairyworks, Rolling Meadow and Alpine.

The purchase complements the $37.8 million purchase of cheese manufacturer Talbot Forest Cheese, which it completed on Aug. 1. 

Dairyworks has 240 staff and will bring Synlait’s total headcount to around 1,200.

Synlait shares last traded at $9.71 and have lifted 7.9 percent so far this year.


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