Possible bid to buy out A2 Milk Company
The A2 Milk Company Ltd may soon be acquired by two unnamed companies.
Announced in a statement to stock exchanges in Australia and New Zealand today, The A2 Milk Company Ltd said it could not state the names of the interested parties as doing so could lead the companies to withdraw their interest. The company is listed both on the Australian Stock Exchange and the New Zealand Stock Exchange and has a market capitalisation of AUD $336 million. The share price rose AUD $0.05, or ten per cent, soon after today’s announcement to AUD $0.60.
“The Proposal is subject to a number of key conditions including access to due diligence, exclusivity, no material adverse change in the affairs or prospects of a2MC, various approvals including under the New Zealand Overseas Investment Act and no change in the number of shares on issue,” said the A2 Milk Company Ltd about the takeover.
“The last condition is particularly relevant as the Company has recently been contemplating, and was in advanced stages of planning for, an equity raising,” said the company.
The A2 Milk Company Ltd board will evaluate the offer and the company says there is no certainty that a takeover will occur.
Who could be bidding for A2 Milk?
Speculation continues today as to the identity of the unnamed interested parties. The most mentioned by tipsters included the New Zealand dairy giant Fonterra Group which has a strong dairy health research division and, being a New Zealand based milk producer, has access to many farmers who have already bred the A1 gene out of their herds.
The A2 Milk company differentiates its milk as being different from usual milk as it is only made using the A2 protein. Normal cow’s milk contains both A1 and A2 proteins. The company says their products can be an alternative for some who get upset stomachs after consuming regular cow’s milk.
Another possibility is Bega Cheese, in which Fonterra holds a 10 per cent shareholding. Bega Cheese has a track record as an innovator and change agent in the Australian dairy sector; in this regard, it was a bid by Bega Cheese for Warrnambool Butter and Cheese Factory (WBCF) that triggered a bidding war that ultimately resulted in Canadian group Saputo taking control of WBCF.
Murray Goulburn (MG) which is based in Victoria is amongst other speculation as it has sought to expand into retail products and may be diversifying beyond its main Devondale brand. In this regard, MG recently acquired the Caboolture Cheese brand from the receiver of United Dairy Power and may be looking for additional consumer dairy brands with high turnover.
Another possible contender is the McLaren Family which currently produces the very popular Jalna Yoghurt and has done so in Victoria for more than 35 years. Jalna milk is sourced from the Goulburn Valley as well as the McLaren Family-owned Biodynamic Organic dairy farm in the Riverina region. Jalna has a very good reputation in nutrition and dairy technology and probiotic health products. Current owners, the McLaren family, purchased the business in 1978 for $350,000 off Polish migrant Simon Goldman. Goldman started Jalna in 1959. The company has an 11 per cent share of the Australian yoghurt market, with 80 per cent of their sales through Coles and Woolworths.
There are also rumours of American and Asian parties interested in the A2 milk product and its marketing in North America and Asian markets.