A2 Milk in talks to become involved in formula manufacturing

Geoff Babidge, managing director and chief executive of A2 Milk.

A2 Milk has confirmed it's in talks to get involved in manufacturing but declined to respond to speculation that it was about to buy Southland's Mataura Valley Milk for $400 million.

The Australian newspaper said a2 Milk was believed to be positioning itself to capitalise on its buoyant share price, with the business understood to be one of the final contenders to buy Mataura Valley.

A2 Milk, a marketing company specialising in dairy and infant formula products that contain only the A2 beta protein, noted media speculation in relation to potential corporate activity involving the company.

"While it is a2 Milk's policy to not respond to media speculation, a2 Milk confirms it has had, and continues to have, various discussions with a number of parties in relation to potential strategic options relating to participation in manufacturing capacity and capability as stated in our half-year results announcement on February 27, 2020."

The company said it was in compliance with the NZ listing rules and that cover continuous disclosure obligations.

A2 Milk's managing director and chief executive Geoff Babidge said at the company's first-half result in February that due to the increasing scale of is infant nutrition business, the company was looking at participating in manufacturing capacity and capability.

As it stands, a2 Milk is supplied by Synlait Milk, in which it has a 19.8 per cent stake. Synlait last traded at $7.35, down 10c. A2 Milk share were down 88c at $19.45.

Mataura Valley Milk was last year put up for sale through Macquarie Capital and DG Advisory, with an information memorandum circulating in the market.

The company is majority owned by China Animal Husbandry Group and New Zealand company Bodco Dairy.

Gore-based Mataura, which moved into production in 2018, said last year it needed an additional $12m in funding to cover expected production and operational costs.

Accountant Aaron Moody and alternate director for Mataura Valley Milk and minority shareholder, local business personality Ian "Inky" Tulloch, last year confirmed the company was seeking a strategic investor to provide an equity injection.