Synlait shares rally on Pōkeno factory sale speculation

Synlait may be on the cusp of selling its plant at Pōkeno. Photo / NZME

Shares in dairy processor Synlait Milk have rallied on speculation the company may be about to sell its processing facility at Pōkeno.

By late morning, the stock was up 5c or 8.77% at 62c.

In a statement to the NZX, Synlait said it was aware of media speculation it would sell its loss-making facility at Pōkeno, situated at the end of Auckland’s southern motorway and close to the dairy heartland of Waikato.

“Synlait advises that it is in discussions with a party with respect to its North Island assets; however, the discussions are incomplete, no binding terms are agreed and there is no certainty that a transaction will occur.

“Synlait will provide any further updates to the market to the extent required in accordance with its continuous disclosure obligations but will not otherwise respond to any further media speculation,” it said.

The Australian newspaper earlier reported that Illinois-based multinational healthcare company Abbott Laboratories was believed to be in talks with Synlait about buying one of its manufacturing facilities in New Zealand.

The paper said Abbott would buy its factory at Pōkeno, which produces plant-based products for Abbott, and which has been subject to a strategic review.

Synlait’s Pokeno plant - commissioned in the 2019/20 dairy season - has been a millstone for the company as it has never functioned at full capacity and always turned in a loss.

The company’s main facility is in Dunsandel, Canterbury, where it makes infant formula for its 20% owner, a2 Milk.

Today’s speculation comes amid a shakeup of the New Zealand infant formula manufacturing.

On Monday, a2 Milk said it planned to buy Yashili New Zealand’s plant - also at Pōkeno - to help pave the way for greater access to China’s $23 billion infant formula market.

A2 outlined plans to sell its stake in Mataura Valley Milk (MVM) in Southland to Open Country Dairy for $100 million, while picking up Yashili’s New Zealand plant at Pōkeno for $282m.

MVM – an advanced nutritional powder drying facility – is 75% owned by a2 Milk and 25% by China’s Animal Husbandry Group (CAHG).

The attraction of Yashili’s Pōkeno plant was that it has two product registrations for the sale of infant formula in China, which are hard to get, a2 Milk said.

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