September 29, 2010
Bright Dairy's stake in Synlait Milk gets go-ahead
The Overseas Investment Office (OIO) has approved the Chinese dairy company Bright Dairy's NZD82-million (US$60 million) investment in Canterbury milk processor Synlait Milk.
The OIO decision comes as the government moves to tighten foreign investment rules after an 18-month review of the Overseas Investment Act, which took on greater significance after opposition to the Chinese bid for 16 Crafar dairy farms in the North Island.
Bright Dairy , China's third-largest dairy company by production, is taking a controlling stake in Synlait's dairy processing operation but its dairy farms are owned by a separate company in which the Chinese company has no stake.
The NZD82 million injected is for a 51% share of Synlait Milk, the processing company. The proceeds will be used to build a second milk powder plant scheduled to open next August, doubling Synlait Milk's processing capacity.
Synlait Ltd, the parent of Synlait Milk, will continue to wholly own the Synlait farms, which supply about 25% of the processing operation's milk.
The plant will produce infant formula and other high-specification formulated milk powders, for consumers in China and elsewhere.
Shanghai-based Bright Dairy is China's largest supplier of value-added dairy products and has an established distribution network along China's populous and increasingly wealthy eastern seaboard.
Synlait Milk chief executive John Penno welcomed the approval and said it completed the New Zealand regulatory process for Bright Dairy's investment.
"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."
The Overseas Investment Act itself will not be changed, but a series of changes to regulations will be implemented from December.
Two new measures will test the merits of foreign investments in sensitive land.
A new "economic interests" test will allow ministers to consider whether New Zealand's economic interests are adequately safeguarded and promoted if an investment bid is accepted.
A second new "mitigating" factor would allow ministers to decide whether a foreign investment bid provides enough opportunities for Kiwi oversight or involvement.