October 21, 2013

Shanghai Pengxin Group to buy second New Zealand dairy business

Chinese conglomerate, Shanghai Pengxin Group, is poised to buy Synlait Farms Ltd, marking the company's second purchase of a dairy farm business in New Zealand.

The founders of Synlait Farms Ltd, who control 50.2% of the company, said on October 18 that they are committed to accept an offer from Synlait Farms Ltd (SFL) Holdings which values the business at NZD85.7 million (US$72.78 million).

SFL Holdings is majority-owned by a subsidiary of Shanghai Pengxin Group, while the founders of Synlait Farms also have a minority stake in SFL Holdings.

The deal will allow Shanghai Pengxin to burnish its portfolio in New Zealand, after it purchased a cluster of farms in the country's North Island for about NZD200 million (US$169.82 million) in 2012.

Synlait Farms, which owns about 4,000 hectares of farmland in the Canterbury region and 13,000 dairy cattle, supplies wholesale milk powder products, including infant milk formula, to China and other countries.

Chinese dairy company, Bright Dairy & Food Co, holds about a 39% stake in Synlait Milk, which makes the Pure Canterbury brand of milk formula which Bright Dairy sells in China.

Chinese dairy companies, Yili Industrial Group and Mengniu Dairy Co are also building infant milk processing plants in New Zealand, in a bid to meet growing demand for high-margin products at home.

New Zealand is the world's leading dairy product export country, with more than 90% of its milk production shipped overseas.