As Finance Minister Bill English announced extra flexibility for cabinet colleagues considering foreign investment in sensitive assets, Canterbury dairy company Synlait today announced that regulators had approved acquisition of its dairy processing arm, Synlait Milk Ltd, by Chinese giant Bright Dairy and Food Co Ltd.
"The Overseas Investment Office (OIO) has approved the deal ... in which Bright Dairy is to acquire 51 percent of the New Zealand company for $NZ82 million," said Synlait Milk chief executive John Penno.
The OIO website tonight listed Mr English's new guidelines for its staff, but did not list the Chinese milk takeover, in which Synlait Ltd will retain a 49 percent stake.
Shanghai-based Bright Dairy is China's largest supplier of processed dairy products, and Mr Penno said the investment would be used to complete a second milk powder plant at Synlait's factory at Dunsandel, due to start operation in August 2011.
The plant, which is predicted to more than double Synlait's current processing capacity of 300 million litres of milk a year, is to produce infant formula and other formulated milk powders packaged for consumers in China and elsewhere. Bright Dairy has an established distribution network along China's populous and increasingly wealthy eastern seaboard.
Synlait Milk handles only a fraction of the milkflows handled by Fonterra Co-operative Group Ltd, which is expected to process about 14 billion litres of milk this season, or 91 percent of New Zealand's production
"This is a further step in attaining our strategic goal of becoming a leading supplier of specialised milk powder products to the Asian market, and growing into one of the larger milk processing businesses in New Zealand," Mr Penno said in a statement.
The Chinese company - whose principal shareholder is the Shanghai municipal government - is expected to appoint four of Synlait's seven board members.
Synlait Milk will still export to its existing client base and continue with a high-value niche special milk strategy, while Synlait Ltd will retain 100 percent ownership of Synlait Farms which current supplies about 25 percent of the milk to the Dunsandel facility. This supply will drop to 12-15 percent when Dunsandel doubles production to 100,000 tonnes at the expanded facility.
Last year Synlait Milk's plan for a $150m float on the NZX by Christmas was cancelled because of lack of support from retail-based investors.
Federated Farmers dairy chairman Lachlan McKenzie said at the time that the weakness of New Zealand's capital markets had been exposed by Bright Dairy.
Today, Mr English said a new ministerial directive letter to the Overseas Investment Office will provide extra clarity and certainty for potential investors about the Government's general approach to foreign investment in sensitive assets.
The Government last year made several changes to simplify overseas investment rules, cut red tape and speed up processing times for applications.
But now changes to regulations outside the Overseas Investment Act include:
* Two new measures under the benefit test used to assess investments in sensitive land:
* A new "economic interests" factor allowing ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted.
The new regulations are set to take effect in December 2010.
NZPA