Crafar buyer bids for South Island farms

Synlait milk tanker in Hororata Canterbury. Synlait Farms supplies about a tenth of listed dairy processor Synlait Milk's needs. Photo / Brett Walker

Shanghai Pengxin, which bought the Crafar family farms in a controversial deal last year, and the Synlait founders are offering $85.7 million to buy South Island dairy farmer Synlait Farms.

SFL Holdings, a joint venture between Pengxin and Synlait Farms chief executive Juliet Maclean and director John Penno, is offering $2.10 a share to Synlait Farms investors in a full takeover bid for the company which operates 13 dairy farms and a total herd of almost 13,000 cows. That's a 31 per cent premium to the $1.60 price the shares last traded at on the Unlisted platform.

If the takeover is successful, SFL plans to inject a further $20 million in fresh capital to reduce debt and accelerate investment. It also plans to reinvest all surplus cash to fund further growth. Penno and Maclean will hold about 26 per cent of SFL, with Pengxin owning the rest via New Zealand Standard Farm, a subsidiary of its Milk New Zealand unit.

The deal emerged after Synlait Farms' board assessed several proposals to strengthen the company's balance sheet and fund future growth. Synlait Farms founders Penno, Maclean and Ben Dingle have agreed to sell their 50.2 per cent stake into the offer.

"NZ Standard Farm's proposal was assessed by the board as being the most attractive and the highest value proposal received, and we are pleased that Juliet and John have joined NZ Standard Farm in the partnership through SFL Holdings," chairman Barry Brook said in a statement.

The formal takeover offer is expected to be made next month, with an expected initial closing date of December 6. The offer will be conditional on SFL achieving 90 per cent ownership and approval from the Overseas Investment Office.

Pengxin's purchase of the 16 Crafar family farms was met with widespread opposition as political parties ramped up pressure on the government over the sale of large tracts of farm land to foreign interests, particularly Chinese.

Synlait Farms supplies about a tenth of listed dairy processor Synlait Milk's needs. The companies were founded together in 2000, sharing some common ownership until 2010, and Synlait Milk listed on the local stock exchange this year.