NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Companies / Agribusiness

A2 Milk’s next move, Sir John Key’s US lawsuit moves forward - Stock Takes

Jamie Gray
By Jamie Gray
Business Reporter·NZ Herald·
3 Oct, 2024 04:00 PM8 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌

Subscriber benefit

The ability to gift paywall-free articles is a subscriber only benefit. See more offers by clicking the button below.

Already a subscriber?  Sign in here
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

A2 Milk is in the market for assets.
A2 Milk is in the market for assets.

A2 Milk is in the market for assets.

Could a purchase of some of China’s New Zealand dairy assets be on the cards for a2 milk?

The company, which at last count had nearly $1 billion in the bank, has in the past expressed an interest in acquisitions.

Last week, the dual-listed infant formula marketer went into a trading halt after the ASX queried what had been an explosive performance of its share price, which was up 11% in one session.

In its response, a2 Milk said the spike was most likely a reaction to China’s stimulus package - outlined last week - which so far has drawn a positive response from the capital markets.

The Chinese government’s package specified that households with two or more children would be offered 800 yuan ($181) a month per child, excluding the first child, which may arrest the decline in the country’s birth rate.

Keep up to date with the day's biggest stories

Sign up to our daily curated newsletter for the day's top stories straight to your inbox.
Please email me competitions, offers and other updates. You can stop these at any time.
By signing up for this newsletter, you agree to NZME’s Terms of Use and Privacy Policy.
Advertisement
Advertise with NZME.

In response to the stimulative measures, China’s A300 Consumer Staples index was up 27% over the week, with the share prices of companies operating in the dairy and nutrition sector increasing significantly over the same period, such as Ausnutria, Bright Dairy, Feihe, H&H, Mengniu and Yili which increased in the range of 13% to 35%.

“Given a2 Milk’s exposure to Chinese consumer demand, a2 Milk considers this to be the most likely explanation for the increase in its share price last week,” a2 Milk said.

But it added: “For completeness, consistent with its publicly announced strategy which includes developing infant milk formula manufacturing capability and increasing China market access, a2 Milk is currently in discussions regarding the potential acquisition of a manufacturing facility.

Advertisement
Advertise with NZME.

“The discussions are incomplete with no binding terms agreed, due diligence not yet completed and there is no certainty a transaction will occur. As such there is no further meaningful information to disclose at this stage.”

Forsyth Barr analyst Matt Montgomerie said the most obvious options in New Zealand were assets currently operated by China’s Yashili NZ and Oceania Dairy.

In 2021, a2 Milk completed the acquisition of a 75 per cent interest in Southland dairy nutrition company Mataura Valley Milk from China Animal Husbandry Group (CAHG), which retained a 25% interest.

Oceania Dairy's Glenavy plant. Photo / NZME
Oceania Dairy's Glenavy plant. Photo / NZME

Most of a2 Milk’s formula is made by Synlait Milk, in which it has a near 20% stake. China’s Bright Dairy owns 65%.

China is a2 Milk’s biggest market and the company ranks in the top five in terms in terms of sales of infant formula in the PRC.

Montgomerie noted that a2 Milk had in the past mentioned New Zealand processing, blending and canning as possibilities.

“We have assessed the range of options in New Zealand, and conclude that the likely options are Yashili NZ or Oceania Dairy [albeit we are unsure if either are willing sellers],” Montgomerie said.

“The key risks are a2 Milk’s limited manufacturing experience, and access to milk supply [particularly in the case of Yashili].

Advertisement
Advertise with NZME.

“Overall, we think if a transaction is made at a reasonable price, it would be a positive outcome: (1) reducing supply chain risks [mainly regulatory], (2) capture manufacturing margin over the long-term, (3) possibly improve near-term earnings [while interest income would decline, if a good acquisition is made, ATM will have significant manufacturing capacity], and (4) open up capital return opportunities.

“A2 Milk has flagged China, and blending and canning, investment only in the past, but we think a fully integrated site acquisition in NZ would be preferred.”

If a successful acquisition was made, it would open up other options for a2 Milk.

“A transaction would: (1) open the path to capital returns over the medium term, (2) capture manufacturing margin [English and new Chinese label products], and (3) improve a2 Milk’s market share capture ability through new products,” he said.

Yashili - which has had a presence in New Zealand since 2012 - has facilities at Pokeno, close to Synlait’s factory.

Oceania Dairy has plant at Glenavy, in South Canterbury, and is a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (Yili) - China’s largest dairy producer.

The state-of-the-art Glenavy processing plant produces milk powder for export to China, where it is used by Yili to make infant formula.

Shares in a2 Milk last traded at $6.81, down 4c.

Sir John Key’s US lawsuit moves forward

A US judge has consolidated two civil lawsuits targeting executives and directors of US tech giant Palo Alto, including former Prime Minister Sir John Key.

The case has now been put on hold until the outcome of a third, similar case is resolved. Two separate plaintiffs, Nathan Silva and Kenneth Blevins, filed shareholder derivate action in April and May respectively.

They allege Palo Alto executives and directors misled investors about the prospects of the company’s products and services and growth expectations. It has also been reported that the plaintiffs have alleged directors and managers sold off a large number of shares, which the lawsuits allege amounts to insider trading.

When news broke of the shareholder lawsuits in May, Key said in a statement there was “no merit” to the lawsuits naming him.

“Along with the other directors of Palo Alto Networks I have been named in a series of copycat lawsuits brought by three shareholders based on unproven allegations against the company in relation to our second-quarter earnings update.

“Such lawsuits are not uncommon in the United States hence why this action has received very little media coverage offshore.

“In my view there is no merit to any of the claims. Palo Alto Networks has very strict share trading policies for its senior management and directors inline with SEC guidelines.

“At all times I have followed these rules. As this matter may well be before the courts I will not be making any further comments.”

In August, US senior district judge Charles Breyer issued an order to consolidate the two plaintiffs’ cases.

This month, he issued a further order to temporarily stay the derivative action pending final resolution of a third separate shareholder claim, brought by Ron and Michele Nabhan against Palo Alto and three individuals, not including Key.

The defendants in the third claim intend to pursue a motion to dismiss, “the outcome of which will be informative to the litigation of the consolidated derivative action”, Judge Breyer said.

The Nabhans have until October 11 to file any amended complaint with the defendants given until December 10 to respond. In terms of any motion to dismiss the claim, opposition must be filed by January 24.

Thames Water’s credibility is disappearing with its cash

If you are standing on a blazing platform, it is best to know how fast it is burning. Thames Water, however, last week warned it could run out of cash at the end of December. Just over two months ago, it had forecast adequate liquidity to survive until next May.

How has the indebted utility, battling to avoid renationalisation, mislaid five months of liquidity? The simplest answer is that Thames Water is burning through cash faster than expected, even since July. This calls into question management’s credibility. Some costs, such as suppliers demanding stricter terms, are out of their control. Others, including putting more cash into reserves under the terms of its complex financing structure, should have been foreseen. Certainly, it is less than ideal when seeking new investors to stump up £3.25 billion for a turnaround.

Another answer — and Thames Water’s preferred one — is that it still does technically have liquidity until May 2025.

It needs a majority of creditors to allow it to draw on £380 million of emergency cash held in reserves. It would also need access to £420m of undrawn facilities, or it will run out of cash at the end of December. It would then enter “standstill” (in other words, default). As well as allowing it to access the £380m of emergency cash without permission, another £550m in liquidity reserve facilities would become available. Capital expenditure, however, would be restricted to essential maintenance.

It strains credibility (again) to suggest nothing has changed. Credit rating agencies are rattled by the disclosure of those conditions. Moody’s and S&P have cut their ratings deeper into junk territory. S&P’s simultaneous downgrade of Thames Water’s management and governance from “moderately negative” to “negative” speaks volumes. (Thames Water insists it was “very clear” that its liquidity position was dependent on both cash and undrawn facilities.)

The chances of Thames Water avoiding temporary renationalisation rest on finding new equity investors — a process that unsurprisingly prompts investor scepticism. Or it could rely on creditors. One possible solution, being examined by a group of 90 creditors holding £9b of Thames Water’s debt, could involve an interim lending facility to tide over Britain’s biggest privatised water utility.

The creditor route looks most plausible. This would surely please regulator Ofwat, which wants creditors to agree a restructuring that would make it easier to raise equity.

It remains unclear, though, why creditors would put up interim finance until they know that Thames Water’s regulatory settlement, which determines allowable returns over five years from April, will be enough to attract new investors.

On the current timetable, that outcome will be published on December 19, and could be pushed into January. Thames Water’s hopes of avoiding renationalisation are — like its cash balances — disappearing fast. - Lex, Financial Times

- Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.

- Additional reporting by Duncan Bridgeman

Subscriber benefit

The ability to gift paywall-free articles is a subscriber only benefit. See more offers by clicking the button below.

Already a subscriber?  Sign in here
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Latest from Agribusiness

Premium
Agribusiness

$15b boost to NZ economy: Fonterra sets milk price forecast and earnings

28 May 09:15 PM
Premium
Agribusiness

A2 Milk silent on A$350m acquisition talk

27 May 12:37 AM
Agribusiness

'Surpassed a significant milestone': Zespri hits $5b in kiwifruit sales

21 May 09:53 PM

‘No regrets’ for Rotorua Retiree

sponsored
Advertisement
Advertise with NZME.
Recommended for you
Council rejects funding for ceramics museum
Whanganui Chronicle

Council rejects funding for ceramics museum

01 Jun 07:00 PM
'I didn't give up on myself': BMX Olympian receives 'special' honour
Rotorua Daily Post

'I didn't give up on myself': BMX Olympian receives 'special' honour

01 Jun 07:00 PM
The real cost of owning pets in NZ and where you can find savings
Business

The real cost of owning pets in NZ and where you can find savings

01 Jun 07:00 PM
Dai Henwood honoured with ONZM as he prepares for surgery
Royals

Dai Henwood honoured with ONZM as he prepares for surgery

01 Jun 07:00 PM
'Serial entrepreneur' Wayne Wright honoured for services to education, philanthropy
Bay of Plenty Times

'Serial entrepreneur' Wayne Wright honoured for services to education, philanthropy

01 Jun 07:00 PM

Latest from Agribusiness

Premium
$15b boost to NZ economy: Fonterra sets milk price forecast and earnings

$15b boost to NZ economy: Fonterra sets milk price forecast and earnings

28 May 09:15 PM

Fonterra forecasts a milk price range of $8-$11 per kg for the 2025/26 season.

Premium
A2 Milk silent on A$350m acquisition talk

A2 Milk silent on A$350m acquisition talk

27 May 12:37 AM
'Surpassed a significant milestone': Zespri hits $5b in kiwifruit sales

'Surpassed a significant milestone': Zespri hits $5b in kiwifruit sales

21 May 09:53 PM
Premium
Dairy prices end NZ season on a flat note, will they stay high in 2026?

Dairy prices end NZ season on a flat note, will they stay high in 2026?

20 May 11:58 PM
Why Cambridge is the new home of future-focused design
sponsored

Why Cambridge is the new home of future-focused design

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • What the Actual
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven CarGuide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP
search by queryly Advanced Search