A2 Milk silent on reports of NZ acquisition

Cashed-up a2 Milk says it has no comment to make on speculation in the Australian media that it is about to make a big acquisition.

The dairy and infant formula marketer had more than $1 billion in cash on its books at the time of its first-half result, and has said it is looking to buy manufacturing assets.

In its February release, chief executive and managing director David Bortolussi said: “As we look ahead, obtaining access to additional China-label infant milk formula registrations to support future growth and developing our own nutritional manufacturing capability remain critical to the company’s supply chain transformation strategy.

“While we are not sharing any new information with you today, we continue to progress opportunities with the intent of making meaningful progress this year,” he said then.

Asked for a response to a report in The Australian, a spokesman for a2 Milk reiterated the company’s policy of not commenting on market speculation.

The newspaper reported over the weekend that a2 Milk was positioning itself for a A$350m-plus ($378m) purchase in New Zealand, with manufacturing assets as its likely target.

“Sources suspect the assets would involve canning and blending facilities that would let a2 Milk capitalise on its China-label product manufacturing,” The Australian said.

“The understanding is that a deal could be finalised within months.”

Auckland-based Jarden said such an acquisition would be “on target” for a2 Milk.

The broker had estimated a2 Milk would have $400m (including working capital) ready for this style of transaction in the 2026 financial year.

“While we see the sector in New Zealand more broadly as ready for consolidation given its oversupply status, we would see potential industry consolidation as complicated by various factors – both technical fit and registration status,” Jarden said.

As it stands, a2 Milk’s infant formula comes from its closely allied manufacturing partner Synlait Milk.

“We note Yashili’s [owned by China Mengniu Dairy] manufacturing facility across the road from Synlait facilities in Pōkeno, and a2 Milk’s supply chain executive’s [Chopin Zhang] prior work experience with Yashili.”

Jarden noted Yashili NZ’s most recent published accounts for the year ended December 2023 put its property, plant and equipment net book value at $204m and development costs relating to infant milk formula registration under the new GB standards in China of $8m.

Yashili NZ had a net equity value of $271m and reported a net loss after tax of $26m in its last financial year.

Yashili NZ’s facility can process a range of milk inputs and produces base ingredients as well as canned infant formula.

Shares in a2 Milk last traded at $8.97, up one cent from Monday’s close.

The stock has gained 13% so far this year.

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