SML - Synlait Milk Ltd

[billkiapi]

and I think he was pushed out...

[Bikeguy]

and I think he was pushed out...

Yes, I read it that way too

[nztx]

Yes, I read it that way too



Poor b*&&er .. look what that wind up doing to him :)

almost synful ..

[Poet]

and I think he was pushed out...
That's good to hear. He will probably make a good witness for the prosecution when the inevitable class action gets underway.

[Newman]

That's good to hear. He will probably make a good witness for the prosecution when the inevitable class action gets underway.

Legal actions against Feltex directors have been going on for 15 years+.

[Balance]

Legal actions against Feltex directors have been going on for 15 years+.

And got nowhere.

Cost the litigants millions of dollars so the lawyers are the big winners.

[billkiapi]

Class actions are usually litigation funded like Manziel was

[Toddy]

That's good to hear. He will probably make a good witness for the prosecution when the inevitable class action gets underway.

What laws have they broken?

[Balance]

Class actions are usually litigation funded like Manziel was

The liquidators took the directors off Mainzeal to court - it was not a class action from shareholders.

[Poet]

What laws have they broken?

I've no clue if they have broken any laws or failed to perform their legal obligations bit I'm sure we will find out once this has played out.
Certainly seems to me that the whole saga is being managed in the interests of some shareholders at the expense of others. Time will tell

[moimoi]

Yes, that’s a fair point, and could very well be the case.

I just can’t help thinking that the guy would be like anyone else, if it was actually as bad as it looks from the outside, and let’s face it he would have some knowledge of the reality, then surely you would sell out?
It doesn’t appear he has…

@ Bikeguy

Founders, or management that have been compensated in shares, almost never sell large blocks of shares on market. Not only can they not exit a large holding without crushing the market price even if they wanted to...by way of example todays turnover on the NZX was $17.5k..To do so would be viewed very very negatively by the rest of us unless the share price is compounding upwards year after year and/or can be justified as a "de-risking" of personal wealth.

No offence..but you seem to be asking a lot of questions on this forum that next to no one on here will have informed answers for.

If a large chunk of your net worth is on the line here then imo its time to seek professional advice rather then being guided by "sharetrader.co.nz" advice..

My opinion only..

GLTA.

[Bikeguy]

@ Bikeguy

Founders, or management that have been compensated in shares, almost never sell large blocks of shares on market. Not only can they not exit a large holding without crushing the market price even if they wanted to...by way of example todays turnover on the NZX was $17.5k..To do so would be viewed very very negatively by the rest of us unless the share price is compounding upwards year after year and/or can be justified as a "de-risking" of personal wealth.

No offence..but you seem to be asking a lot of questions on this forum that next to no one on here will have informed answers for.

If a large chunk of your net worth is on the line here then imo its time to seek professional advice rather then being guided by "sharetrader.co.nz" advice..

My opinion only..

GLTA.

I respect your right to your opinion,
I apologise to anyone if you feel I have been asking to many questions on SML or any other shares on this forum, I just find it interesting.

[kiora]

Are there some investors still not familiar with what happened here?

https://www.linkedin.com/posts/national-business-review_synlait-a2-milk-named-after-court-lifts-activity-7100229601016119296-G6B2/

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/5751329

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/6283988/shareholdings

[Balance]

I respect your right to your opinion,
I apologise to anyone if you feel I have been asking to many questions on SML or any other shares on this forum, I just find it interesting.

Nothing to apologise for asking questions. Up to others whether they want to engage and interact (answer, speculate or query further) but as is often said, better to ask and appear foolish for 1 minute but be enlightened, rather than keep quiet and stay ignorant for life.

SML is a very interesting situation and there are so many moving parts to consider before the situation is resolved.

In the end though, it is going to come down to one thing and imo, one thing only which will determine SML's fate.

[Bikeguy]

Nothing to apologise for asking questions. Up to others whether they want to engage and interact (answer, speculate or query further) but as is often said, better to ask and appear foolish for 1 minute but be enlightened, rather than keep quiet and stay ignorant for life.

SML is a very interesting situation and there are so many moving parts to consider before the situation is resolved.

In the end though, it is going to come down to one thing and imo, one thing only which will determine SML's fate.

I have enjoyed the Sharetrader Forum, I am not a big investor and other than kiwi saver I have $5 k spread across 5 shares, so I don’t want to take up anyone’s time on here, I just thought Sharetrader was a pretty open thing,
I can clearly see that some posters on here are seriously financially astute and financial professionals in their careers, I have benefited from reading their thoughts and posts, so I say thank you to them for taking the time to post,

Balance can I ask you, what do you think that one thing is that will determine SML fate? (And my 1k) lol

[RupertBear]

I have enjoyed the Sharetrader Forum, I am not a big investor and other than kiwi saver I have $5 k spread across 5 shares, so I don’t want to take up anyone’s time on here, I just thought Sharetrader was a pretty open thing,
I can clearly see that some posters on here are seriously financially astute and financial professionals in their careers, I have benefited from reading their thoughts and posts, so I say thank you to them for taking the time to post,

Balance can I ask you, what do you think that one thing is that will determine SML fate? (And my 1k) lol

Bikeguy please keep posting and asking questions. They are questions many of us are mulling over as well. And it makes no difference whether you are a big investor or a smaller one. It is your hard earned money at stake so I understand you wanting to understand as much as possible about what is going on and what the potential outcome will be. We are all wondering the same thing. I dont think moimoi was criticising you for asking lots of questions rather it was his/her way of expressing concern for you if you had a large holding. That was my take on it. Good luck

[Bikeguy]

Bikeguy please keep posting and asking questions. They are questions many of us are mulling over as well. And it makes no difference whether you are a big investor or a smaller one. It is your hard earned money at stake so I understand you wanting to understand as much as possible about what is going on and what the potential outcome will be. We are all wondering the same thing. I dont think moimoi was criticising you for asking lots of questions rather it was his/her way of expressing concern for you if you had a large holding. That was my take on it. Good luck

Respect to you Rupertbear, and respect to Moimoi too👊

[Newman]

Does anyone know why Jarden Direct restricts placing buy/sell orders to the last trading percentage plus/minus 2%? Currently, only orders between 170-174% will be accepted.

[stoploss]

Does anyone know why Jarden Direct restricts placing buy/sell orders to the last trading percentage plus/minus 2%? Currently, only orders between 170-174% will be accepted.
I think it is to stop someone making a FAT FINGERS error.... very frustrating in the case of news on a small illiquid stock.
You might have to call them and get them to release the order manually.

[Balance]

I think it is to stop someone making a FAT FINGERS error.... very frustrating in the case of news on a small illiquid stock.
You might have to call them and get them to release the order manually.

Most unusual turnaround on the bonds - all bids and no offers currently.

[whatsup]

Most unusual turnaround on the bonds - all bids and no offers currently.

If that the case bets on that SML will pull through ?

[billkiapi]

@balance Pretty sure it was litigation funded and was a creditor of Manziel action?

[Balance]

@balance Pretty sure it was litigation funded and was a creditor of Manziel action?

The liquidator of Mainzeal took the case against the directors and won. It was 100% not litigation funded.

https://norlinglaw.co.nz/reckless-directors-of-mainzeal-ordered-to-pay-36-million/

Litigation funded cases in NZ are few and far in between.

Feltex was one and the case funded by litigants lost. Unfairly imo but that’s how the cookie crumbled. 3 QCs and an army of lawyers represented the defendants - that’s how much the insurance companies and defenders threw at the case.

The class action against A2M is pending the outcome of a similar class action in Australia.

I don’t know of any others.

[Balance]

If that the case bets on that SML will pull through ?

Any yield over 25% implies junk bond status imo and high likelihood of default.

SML’s sp however suggests otherwise.

[Balance]

I have enjoyed the Sharetrader Forum, I am not a big investor and other than kiwi saver I have $5 k spread across 5 shares, so I don’t want to take up anyone’s time on here, I just thought Sharetrader was a pretty open thing,
I can clearly see that some posters on here are seriously financially astute and financial professionals in their careers, I have benefited from reading their thoughts and posts, so I say thank you to them for taking the time to post,

Balance can I ask you, what do you think that one thing is that will determine SML fate? (And my 1k) lol

There are certainly some professionals and experienced investors contributing on this site - posters have to watch out for who they are and what are their motivations!

Most contribute to share their knowledge and experience. And we should be thankful for that.

A few do so to take advantage of the newbies so be careful you do not become a sheep to the slaughter!

[billkiapi]

The liquidator of Mainzeal took the case against the directors and won. It was 100% not litigation funded.

https://norlinglaw.co.nz/reckless-directors-of-mainzeal-ordered-to-pay-36-million/

Litigation funded cases in NZ are few and far in between.

Feltex was one and the case funded by litigants lost. Unfairly imo but that’s how the cookie crumbled. 3 QCs and an army of lawyers represented the defendants - that’s how much the insurance companies and defenders threw at the case.

The class action against A2M is pending the outcome of a similar class action in Australia.

I don’t know of any others.


manziel funded by LPF: “In late 2014, the Mainzeal liquidators, on behalf of the creditors, approached LPF for funding to assist in taking legal action against the directors.”

https://www.lpfgroup.co.nz/post/mainzeal-a-litigation-funder-s-perspective

[billkiapi]

Are there some investors still not familiar with what happened here?

https://www.linkedin.com/posts/national-business-review_synlait-a2-milk-named-after-court-lifts-activity-7100229601016119296-G6B2/

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/5751329

https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/6283988/shareholdings

yes, I come back to that untidy situation- something very fishy went on there- and I remember something in the NBR in last few weeks about the case, but I can’t find it. Surely Peno didn’t try to stick it to A2M…. If he did, we are all wearing the result of that

[Balance]

manziel funded by LPF: “In late 2014, the Mainzeal liquidators, on behalf of the creditors, approached LPF for funding to assist in taking legal action against the directors.”

https://www.lpfgroup.co.nz/post/mainzeal-a-litigation-funder-s-perspective

Thank you, billkiapi!

I stand absolutely corrected and have learnt something new.

[Balance]

yes, I come back to that untidy situation- something very fishy went on there- and I remember something in the NBR in last few weeks about the case, but I can’t find it. Surely Peno didn’t try to stick it to A2M…. If he did, we are all wearing the result of that

You mean this article?

https://www.nbr.co.nz/investment/penno-actions-regrettable-and-unacceptable-says-a2-letter/

I don’t have a subscription so cannot elaborate any further.

[kiora]

This one
https://www.linkedin.com/posts/national-business-review_synlait-a2-milk-named-after-court-lifts-activity-7100229601016119296-G6B2/

Ouch very messy

[silverblizzard888]

You mean this article?

https://www.nbr.co.nz/investment/penno-actions-regrettable-and-unacceptable-says-a2-letter/

I don’t have a subscription so cannot elaborate any further.

This begins with a company called Trust Codes that offers product tracing technology to A2 and Synlait. Apparently Penno was not forthcoming to A2 that he was a shareholder of Trust Codes through his investment vehicle Okoura Holdings. Signum the main owner of Trust Codes was in financial trouble and one of its creditors was Okoura, Penno's investment vehicle. Penno sought to put them in receivership, which really annoyed A2 because they had a good working relationship with Trust Codes management and had they known Trust Codes was in trouble they would have provided financial backing to them. Okoura had the power to put Signum and Trust Codes into receivership which would have affected A2's business.

A2's David Bortolussi had concerns regarding Penno's position as Chair of Synlait and Shareholder of Trust Codes who Penno had a shareholding in and his wife was Chair of Trust Codes too, meaning they ultimately has influence in both companies A2 was a big customer to. Bortolussi said it was unacceptable to A2 being a shareholder and customer of Synlait that Penno influence both companies and withheld his interest in Trust Codes. Ultimately they were very annoyed that he could have disrupted their business if he had put Trust Codes into recievership, along with apparently a nasty email sent to Bortolussi with negative remarks about Trust Codes CEO.

Could be a big reason why Penno resigned recent from the board. His past conflicts with A2 probably does not sit well with them.

[Balance]

Thanks sb888.

Sounds indeed like John Penno should have removed himself earlier from A2M after the Trust Codes’ episode. Bright might have been unaware of what was happening between John, DB and A2M until it blew up in the courts.

Definitely would not have helped the working relationship between SML and A2M.

[billkiapi]

And then there was this - something very fishy going on here because soon after, A2M added more claims to arbitration with Synlait.

https://www.nbr.co.nz/investment/bad-synlait-data-alleged-in-tracing-company-claim/

[silverblizzard888]

And then there was this - something very fishy going on here because soon after, A2M added more claims to arbitration with Synlait.

https://www.nbr.co.nz/investment/bad-synlait-data-alleged-in-tracing-company-claim/

Trust Codes alleged that Synlait supplied bad data that was missing for 30% of A2's products and in place supplied a competitors data instead. Trust Codes fixed the problem with the data but was never compensated by Synlait hence why they were suing for $800k.

[Sideshow Bob]

https://www.nzx.com/announcements/433341

Synlait Milk Limited’s (Synlait) Special Shareholders’ Meeting will be held on Thursday 11 July 2024 at 2.00pm, in person at Synlait's Dunsandel facility, located at 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand, and online at: www.meetnow.global/nz (http://www.meetnow.global/nz)

The meeting is to vote on the resolution to approve the proposed entry into a $130 million shareholder loan to be made available to Synlait by Bright Dairy International Investment Limited, a related company of Bright Dairy Holding Limited, Synlait’s 39.01% shareholder. If the resolution is approved, Synlait will fully draw down the loan to meet the $130 million payment due to its banks on 15 July 2024.

Importance of the resolution to Synlait’s future

Synlait will only be able to meet its $130 million payment obligation to its banks on 15 July 2024 if the resolution is approved by shareholders other than Bright Dairy by way of an ordinary resolution. An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.

If the $130 million payment is not made and the banks do not agree to alternative arrangements, the Board believes Synlait will need to cease trading or initiate a formal insolvency process.

Recommendation of Independent Directors

The Independent Directors of Synlait unanimously recommend that shareholders vote in favour of the resolution.

Voting intentions of major shareholders

Bright Dairy cannot vote in favour of the resolution; as such, the Directors appointed by Bright Dairy have abstained from making a recommendation.
Whilst as at the date of the notice of meeting Synlait and The a2 Milk Company Limited have engaged in discussions, The a2 Milk Company Limited has not determined how it will vote on the resolution. If Synlait is advised of a change of status of The a2 Milk Company Limited's voting intentions, it will update shareholders by way of market announcement.

The deadline for returning proxy votes is 2.00pm on Tuesday 9 July.

Independent appraisal report

In accordance with the NZX Listing Rules, the Board commissioned an independent appraisal report for shareholders to support their consideration of the resolution. Shareholders should read the report prepared by Northington Partners in full alongside the notice of meeting. Both documents (released with this announcement) contain important information that should be carefully considered before voting. Overall, the independent appraisal report concluded that the terms and conditions of the shareholder loan are fair to Synlait shareholders not associated with Bright Dairy.

Banking facilities update

Included within the Notice of Meeting is an update on Synlait’s existing banking facilities.

As announced on 2 April 2024 at the half year result, the banks agreed to short-term covenant relaxation in the company’s existing facility to provide time to reduce debt. Since that date, Synlait has requested waivers in respect of its leverage ratios and interest coverage ratio, and a deferral of the maturity/limit step downs of relevant facilities through to the end of July 2024.

The banks’ agent has confirmed that each of the banks have received credit approval to the covenant waivers and the deferral of the relevant maturity/limit step downs in June and July until such time that Synlait’s planned equity capital raising is completed. The approval is subject to the addition of a covenant to achieve minimum adjusted EBITDA for FY24 of $45 million.

Synlait and the banks are in the process of negotiating the documentation for these waivers and satisfying any applicable conditions. Further information can be found in the Notice of Meeting.

Synlait Chair George Adams commented: “Synlait is now progressing at pace a series of structural initiatives to address the scale of challenges we face today.”
“We are committed to resetting Synlait’s balance sheet, with the support of Bright Dairy, to ensure we return to a position where we can deliver the growth potential we see in our core Advanced Nutrition and Foodservice businesses.”

“The Board and management have spent considerable time aligning on Synlait’s business recovery plan for this financial year and next, focusing on reducing debt, accelerating volume growth, and optimising cost and operational performance. We are committed to delivering on this for the benefit of all our stakeholders – customers, farmers, shareholders, staff, and suppliers.”

On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”

“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”

“Bright Dairy fully supports Synlait raising equity capital, subject to finalised terms and all necessary approvals being received, to more substantially reset the company’s equity and debt position to provide a platform to return to sustainable growth for Synlait’s farmers and all shareholders.”

The Synlait Board, management, and its advisers are continuing to progress the structure, terms and conditions of a proposed equity raising and will further update shareholders by the end of August, possibly earlier, by market announcement.

For more information contact:

[Bikeguy]

https://www.nzx.com/announcements/433341

Synlait Milk Limited’s (Synlait) Special Shareholders’ Meeting will be held on Thursday 11 July 2024 at 2.00pm, in person at Synlait's Dunsandel facility, located at 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand, and online at: www.meetnow.global/nz (http://www.meetnow.global/nz)

The meeting is to vote on the resolution to approve the proposed entry into a $130 million shareholder loan to be made available to Synlait by Bright Dairy International Investment Limited, a related company of Bright Dairy Holding Limited, Synlait’s 39.01% shareholder. If the resolution is approved, Synlait will fully draw down the loan to meet the $130 million payment due to its banks on 15 July 2024.

Importance of the resolution to Synlait’s future

Synlait will only be able to meet its $130 million payment obligation to its banks on 15 July 2024 if the resolution is approved by shareholders other than Bright Dairy by way of an ordinary resolution. An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.

If the $130 million payment is not made and the banks do not agree to alternative arrangements, the Board believes Synlait will need to cease trading or initiate a formal insolvency process.

Recommendation of Independent Directors

The Independent Directors of Synlait unanimously recommend that shareholders vote in favour of the resolution.

Voting intentions of major shareholders

Bright Dairy cannot vote in favour of the resolution; as such, the Directors appointed by Bright Dairy have abstained from making a recommendation.
Whilst as at the date of the notice of meeting Synlait and The a2 Milk Company Limited have engaged in discussions, The a2 Milk Company Limited has not determined how it will vote on the resolution. If Synlait is advised of a change of status of The a2 Milk Company Limited's voting intentions, it will update shareholders by way of market announcement.

The deadline for returning proxy votes is 2.00pm on Tuesday 9 July.

Independent appraisal report

In accordance with the NZX Listing Rules, the Board commissioned an independent appraisal report for shareholders to support their consideration of the resolution. Shareholders should read the report prepared by Northington Partners in full alongside the notice of meeting. Both documents (released with this announcement) contain important information that should be carefully considered before voting. Overall, the independent appraisal report concluded that the terms and conditions of the shareholder loan are fair to Synlait shareholders not associated with Bright Dairy.

Banking facilities update

Included within the Notice of Meeting is an update on Synlait’s existing banking facilities.

As announced on 2 April 2024 at the half year result, the banks agreed to short-term covenant relaxation in the company’s existing facility to provide time to reduce debt. Since that date, Synlait has requested waivers in respect of its leverage ratios and interest coverage ratio, and a deferral of the maturity/limit step downs of relevant facilities through to the end of July 2024.

The banks’ agent has confirmed that each of the banks have received credit approval to the covenant waivers and the deferral of the relevant maturity/limit step downs in June and July until such time that Synlait’s planned equity capital raising is completed. The approval is subject to the addition of a covenant to achieve minimum adjusted EBITDA for FY24 of $45 million.

Synlait and the banks are in the process of negotiating the documentation for these waivers and satisfying any applicable conditions. Further information can be found in the Notice of Meeting.

Synlait Chair George Adams commented: “Synlait is now progressing at pace a series of structural initiatives to address the scale of challenges we face today.”
“We are committed to resetting Synlait’s balance sheet, with the support of Bright Dairy, to ensure we return to a position where we can deliver the growth potential we see in our core Advanced Nutrition and Foodservice businesses.”

“The Board and management have spent considerable time aligning on Synlait’s business recovery plan for this financial year and next, focusing on reducing debt, accelerating volume growth, and optimising cost and operational performance. We are committed to delivering on this for the benefit of all our stakeholders – customers, farmers, shareholders, staff, and suppliers.”

On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”

“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”

“Bright Dairy fully supports Synlait raising equity capital, subject to finalised terms and all necessary approvals being received, to more substantially reset the company’s equity and debt position to provide a platform to return to sustainable growth for Synlait’s farmers and all shareholders.”

The Synlait Board, management, and its advisers are continuing to progress the structure, terms and conditions of a proposed equity raising and will further update shareholders by the end of August, possibly earlier, by market announcement.

For more information contact:

She’s getting real now folks….

[winner69]

A2 not yet saying whether they support it or not

[Balance]

A2 not yet saying whether they support it or not

Forgone conclusion.

Where does A2 sell most of its IF to and who has the most to lose if SML goes into insolvency?

[Ggcc]

So if bail out does not take place, is when negotiations that have already taken place have been decided between Bright and A2M to take over company. Or are there other options?

[bull....]

looks like a2 playing hardball by saying they havnt decided on vote intentions. probably want even lower prices they have to pay synliat for there vote

[Balance]

So if bail out does not take place, is when negotiations that have already taken place have been decided between Bright and A2M to take over company. Or are there other options?

They would have canvassed joint takeover as an option but for whatever reason, have decided not to pursue that option.

No other option on the table - it's either the Bright loan (terms look perfectly reasonable - much to my surprise) or insolvency given the time frame involved.

Unless A2 wants to launch a takeover bid - LOL.

[silverblizzard888]

Terms of the loan: (on these terms basically kicking the can down the road till they get the capital raising done)

First 12 months of the Loan, interest is payable quarterly at 8% pa. If the extension option is exercised, the interest rate resets and will be equal to quarterly BKBM + 1.60% pa (payable quarterly). In certain circumstances (where an “Interest Deferral Event” exists), Synlait has the right for interest to be capitalised rather than paid in cash


All in the hands of A2 right now with 33% influence on the vote, they will also be considering the effects of this loan and further down whether they want to be participating in the capital raise:

Bright is not able to vote in favour of the Shareholder Loan. A2 Milk holder of 19.8% of the shares (which equates to approximately 33% of the votes eligible to be cast on the resolution), will be influential in determining the outcome of the resolution to approve the Shareholder Loan.

Capital raising fully supported by Bright and will increase overall percentage holding of the company, especially if many shareholders are absent in the raise:

We believe that Bright's shareholding in Synlait is likely to increase as a result of the Equity Raising. In these circumstances, Bright’s participation in the Equity Raising would require shareholder approvals under both the NZX Listing Rules

[Rawz]

What a disaster. $0.29 per share. $69m market cap. What would I do if I found myself holding right now? hmmm. Is it better to sell (assuming there are buyers) and move to safer bets? Where is the best upside, there sure is upside here. Where is the least downside? Definitely not here.

I would bet the loan goes through with high probability (90% like). But get it wrong and it's 100% loss of todays investment. Compared to bets elsewhere, get it wrong (profit downgrade) at say TWR or 2CC and downside is not very much. Not 100% like SML...

If it was less than 5% of my portfolio i would stay invested. If over this I would sell and move to safer bets with upside and very little downside.

Just rambling here,,

[Newman]

"On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”
“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”


My interpretation: Bright Dairy has options if A2M votes against the loan, there is no way A2M could cheaply buy the Dunsandel plant, and small shareholders and bondholders do not need to worry about being left with nothing.

[silverblizzard888]

A2 can't let Synlait fail since it holds the SAMR in its name, so never mind the assets they need the company itself or their business may be interrupted. They will approve the loan and participate in the capital raise, or they will vote to not approve and launch a takeover of Synlait by way of a merger with Bright getting shares in A2 and a board seat, along with a partnership agreement.

[Bikeguy]

"On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”
“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”


My interpretation: Bright Dairy has options if A2M votes against the loan, there is no way A2M could cheaply buy the Dunsandel plant, and small shareholders and bondholders do not need to worry about being left with nothing.

I agree with you…Bright could not have made it any plainer, they are going to do what it takes to keep SML going.

[Snoopy]

A2 can't let Synlait fail since it holds the SAMR in its name, so never mind the assets they need the company itself or their business may be interrupted. They will approve the loan and participate in the capital raise, or they will vote to not approve and launch a takeover of Synlait by way of a merger with Bright getting shares in A2 and a board seat, along with a partnership agreement.


I am not sure this is right. If Synlait goes down, the SAMR is not lost. It is just that management of what was Synlait, transfers from 'the Synlait team' to 'the receivers team'. The receivers would realise that a key part of the value of what they now manage, is the ability of the Dunsandel plant to supply ATM, where the SAMR is critical. The receivers would be crazy to pull the plug on an arrangement like that, critical to valuing the underlying assets they would have for sale. The way I see it, Synlait 'going down' might benefit A2 because:

i/ It would put to bed the current supply agreement fracas with Synlait management, who would be gone.
ii/ They would retain the milk product supply contract with the Dunsandel plant, but possibly on more favourable terms, because the receivers would be desperate to keep the contract going.

Sure A2 would lose the equity they have already put into the Synlait business (although in fairness that realistically went out the door some time ago). But taking the forward looking view only, it looks like receivership for Synlait would suit A2 very well. What am I missing?

One thing I could be missing is the risk of an unnamed third party snatching the Dunsandel assets. But such a third party when bidding would have to also factor in signing up new supply contracts to replace all the existing farmers who want out. Otherwise they would just be buying a milk plant with no milk to process, which doesn't sound like a value proposition. So A2 may have already figured out that, should Synlait go into receivership, no-one would realistically be able to outbid them for those Dunsandel Assets when they are eventually resold. And only A2 as a dairy company is in a strong enough position to offer farmers threatening to leave the Synlait supply chain, a milk price good enough to keep them from going.

SNOOPY

[Balance]

A change in SML’s ownership will also trigger a review of the SAMR.

[Newman]

I am not sure this is right. If Synlait goes down, the SAMR is not lost. It is just that management of what was Synlait, transfers from 'the Synlait team' to 'the receivers team'. The receivers would realise that a key part of the value of what they now manage, is the ability of the Dunsandel plant to supply ATM, where the SAMR is critical. The receivers would be crazy to pull the plug on an arrangement like that, critical to valuing the underlying assets they would have for sale. The way I see it, Synlait 'going down' might benefit A2 because:

i/ It would put to bed the current supply agreement fracas with Synlait management, who would be gone.
ii/ They would retain the milk product supply contract with the Dunsandel plant, but possibly on more favourable terms, because the receivers would be desperate to keep the contract going.

Sure A2 would lose the equity they have already put into the Synlait business (although in fairness that realistically went out the door some time ago). But taking the forward looking view only, it looks like receivership for Synlait would suit A2 very well. What am I missing?

One thing I could be missing is the risk of an unnamed third party snatching the Dunsandel assets. But such a third party would have to also factor in signing up new supply contracts to replace all the existing farmers who want out. Otherwise they would just be buying a milk plant with no milk to process, which doesn't sound like a value proposition. So A2 may have already figured out that, should Synlait go into receivership, no-one would realistically be able to outbid them for those Dunsandel Assets when they are eventually resold.

SNOOPY

Receivership and the sale of assets at a discount are not acceptable to Bright Dairy for a very simple reason: The board members representing Bright Dairy would be sent to jail in China. They should have reached an agreement with Chinese banks in New Zealand to force A2M to pay a premium to assets should it buy the Dunsandel plant.

[silverblizzard888]

Theres a few scenarios that could go wrong if A2 decides to play with fire:
1. If they upset Bright they may use their political capital to have the SAMR revoked or not renewed in the future
2. If a big player with market share in China's infant formula wanted to deal a deadly blow to A2's market share in China they would take Dunsandel, theres big companies with much deeper pockets than A2 out there. Even Abbott may take an interest since Synlait is approved to produce infant formula for them in the US.
3. Bright might end up with Dunsandel since it values those assets quite highly

[Ggcc]

Theres a few scenarios that could go wrong if A2 decides to play with fire:
1. If they upset Bright they may use their political capital to have the SAMR revoked or not renewed in the future
2. If a big player with market share in China's infant formula wanted to deal a deadly blow to A2's market share in China they would take Dunsandel, theres big companies with much deeper pockets than A2 out there. Even Abbott may take an interest since Synlait is approved to produce infant formula for them in the US.
3. Bright might end up with Dunsandel since it values those assets quite highly
If the price is right, A2 could opt to Capital raise money to include to the war chest they already own to buy SML. A2M have not released anything after this announcement by SML, letting me believe negotiations are still ongoing with Bright and SML to come to a common agreement. I feel we are underestimating A2M management and their business partners.

[Snoopy]

A change in SML’s ownership will also trigger a review of the SAMR.


Good point. But which Synlait owns the SAMR? According to the NZ company register, there are four active Synlaits currently trading:

1/ Synlait Milk Dunsandel Farms Limited (incorporated 25 May 2022) owned 100% by Synlait Milk Limited.
2/ Synlait Milk (Holdings) No. 1 Limited (incorporated 9 Aug 2020) owned 100% by Synlait Milk Limited.
3/ Synlait Milk Finance Limited (incorporated 14 June 2013) owned 100% by Synlait Milk Limited.
4/ Synlait Milk Limited (incorporated 2 March 2005)

What say you put the parent Synlait Milk Company into receivership, crippled by debt. But the subsidiary that owned the milk licence SAMR was not put into receivership, because it was still trading profitably. Thus you could keep the SAMR out of the receivership process, avoiding the need for any reapplication and re-approval of the licence, while the ownership of the parent is sorted out?

SNOOPY

[silverblizzard888]

If the price is right, A2 could opt to Capital raise money to include to the war chest they already own to buy SML. A2M have not released anything after this announcement by SML, letting me believe negotiations are still ongoing with Bright and SML to come to a common agreement. I feel we are underestimating A2M management and their business partners.

Yes you are right we can't underestimate A2 either, they are the ones with the 'brains' after all. Synlait was just the muscle haha.
Potentially if A2 doesn't participate in the capital raise they would probably want to be assured by Bright that their supply chain is still safe just as leverage before voting to approve the loan.

[aperitif]

They want a2's money and are still in an arbitration process with them re "exclusive supply rights" hahahaha

[Balance]

Good point. But which Synlait owns the SAMR? According to the NZ company register, there are four active Synlaits currently trading:

1/ Synlait Milk Dunsandel Farms Limited (incorporated 25 May 2022) owned 100% by Synlait Milk Limited.
2/ Synlait Milk (Holdings) No. 1 Limited (incorporated 9 Aug 2020) owned 100% by Synlait Milk Limited.
3/ Synlait Milk Finance Limited (incorporated 14 June 2013) owned 100% by Synlait Milk Limited.
4/ Synlait Milk Limited (incorporated 2 March 2005)

What say you put the parent Synlait Milk Company into receivership, crippled by debt. But the subsidiary that owned the milk licence SAMR was not put into receivership, because it was still trading profitably. Thus you could keep the SAMR out of the receivership process, avoiding the need for any reapplication and re-approval of the licence, while the ownership of the parent is sorted out?

SNOOPY

Certainly possibilities but is it worth the risk of pulling the tail of the dragon?

Dealing with China here.

There is no appeal process unlike our judicial system here!

[winner69]

Sometimes doing nothing is a good strategy …like opting out and saying nothing

A2 might not bother go to the meeting or even vote

That would be fun

[Balance]

Sometimes doing nothing is a good strategy …like opting out and saying nothing

A2 might not bother go to the meeting or even vote

That would be fun

Surely A2 has too much at stake not to make any comment or commitment, one way or the other?

[Bikeguy]

Theres a few scenarios that could go wrong if A2 decides to play with fire:
1. If they upset Bright they may use their political capital to have the SAMR revoked or not renewed in the future
2. If a big player with market share in China's infant formula wanted to deal a deadly blow to A2's market share in China they would take Dunsandel, theres big companies with much deeper pockets than A2 out there. Even Abbott may take an interest since Synlait is approved to produce infant formula for them in the US.
3. Bright might end up with Dunsandel since it values those assets quite highly

Agreed, A2 could end up with a tiger by the tail with Bright if theres to much blood on the floor…
At the end of the day these statements today to the market show Bright are pretty committed to keeping SML going…and they have very deep pockets.
Both of them together are a fantastic value proposition, I just hope the can put it all back together and move forward together again.

[billkiapi]

Good point. But which Synlait owns the SAMR? According to the NZ company register, there are four active Synlaits currently trading:

1/ Synlait Milk Dunsandel Farms Limited (incorporated 25 May 2022) owned 100% by Synlait Milk Limited.
2/ Synlait Milk (Holdings) No. 1 Limited (incorporated 9 Aug 2020) owned 100% by Synlait Milk Limited.
3/ Synlait Milk Finance Limited (incorporated 14 June 2013) owned 100% by Synlait Milk Limited.
4/ Synlait Milk Limited (incorporated 2 March 2005)

What say you put the parent Synlait Milk Company into receivership, crippled by debt. But the subsidiary that owned the milk licence SAMR was not put into receivership, because it was still trading profitably. Thus you could keep the SAMR out of the receivership process, avoiding the need for any reapplication and re-approval of the licence, while the ownership of the parent is sorted out?

SNOOPY

definately Synlait Milk owns Dunsandel
and the GB reg/SAMR attaches to the site not the company

[billkiapi]

Can’t assume anything at this stage- Dunsandel value significantly impacted without A2M volume with a lot of raw material and nowhere to go. A2M have options to make and dry. Much of Brights support is to ensure they turn a 130M unsecured underwrite into a secured loan. Receivership means the bank asks for 130M from Bright if Synlait drops, and Bright have zero security for that.

[Balance]

definately Synlait Milk owns Dunsandel
and the GB reg/SAMR attaches to the site not the company

This is what Synlait stated when the SAMR was renewed last year :

Synlait Milk Limited (Synlait) is extremely pleased to announce that the State Administration for Market Regulation (SAMR) has notified it of the successful re-registration of The a2 Milk Company’s Chineselabelled 至初® Infant Formula (stages one, two and three) at its Dunsandel facility, which will allow it tomanufacture and export this product for the China market until September 2027.

As the manufacturer of those products, the SAMR registration is held by Synlait and attached to its Dunsandel facility. The re-registration is pivotal for the ongoing success of the manufacturing and supply agreement that Synlait and The a2 Milk Company have.

“Registration is held by Synlait”

[Newman]

Sometimes doing nothing is a good strategy …like opting out and saying nothing

A2 might not bother go to the meeting or even vote

That would be fun

"An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question".
Am I right that if A2 Milk does not vote, its 20% shareholding will not be used to calculate the simple majority (50.01%)?

[billkiapi]

Yes I think so. If they abstain, the simple majority of those who did vote is needed.

[billkiapi]

This is what Synlait stated when the SAMR was renewed last year :

Synlait Milk Limited (Synlait) is extremely pleased to announce that the State Administration for Market Regulation (SAMR) has notified it of the successful re-registration of The a2 Milk Company’s Chineselabelled 至初® Infant Formula (stages one, two and three) at its Dunsandel facility, which will allow it tomanufacture and export this product for the China market until September 2027.

As the manufacturer of those products, the SAMR registration is held by Synlait and attached to its Dunsandel facility. The re-registration is pivotal for the ongoing success of the manufacturing and supply agreement that Synlait and The a2 Milk Company have.

“Registration is held by Synlait”

and A2M said:

”SAMR’s approval will allow Synlait to manufacture 至初® for a2MC until September 2027[1] (https://thea2milkcompany.com/market-announcements/samr-approval-2023#_ftn1). Production is expected to commence later this month with product transitioning in market during 1H24[2] (https://thea2milkcompany.com/market-announcements/samr-approval-2023#_ftn2).”

[billkiapi]

So I think A2M hold the GB product registration and could make anywhere with a SAMR slot?

[kiwijay]

Turns out shiny marketing only gets you far when the tides in eh.

[Balance]

So I think A2M hold the GB product registration and could make anywhere with a SAMR slot?

References made always to Synlait & SAMR in relation to the SAMR registration process of A2 IF by ATM :

From A2M :

“We are pleased that our current product registration has been renewed, effectively to late February 2023, and we will continue to work collaboratively with Synlait and SAMR in relation to registration of our China label IMF product formulated in line with China’s new GB standards.“

Also, there's the matter of milk supply - the farmers supplying A2 milk to make the IF is with Synlait? So not as easy as to shift production to another plant which does not have the A2 milk supply contracts.

[aperitif]

Interesting….a2 have an opposing view

[Newman]

Interesting….a2 have an opposing view

How was the A2M CEO's message "accidentally" leaked out?

At least for a while, Synlait (or Bright Dairy) and A2M need each other. After September 2027, China could be very different from now. It might not need IF if WWIII starts, in which case traditional dairy products would be in strong demand.

[silverblizzard888]

How was the A2M CEO's message "accidentally" leaked out?

At least for a while, Synlait (or Bright Dairy) and A2M need each other. After September 2027, China could be very different from now. It might not need IF if WWIII starts, in which case traditional dairy products would be in strong demand.

It wasn't leaked, this is from their 19th February 2024 Investor call.

[aperitif]

If you had bothered to open the link, you would have read the brand owner(a2) and manufacturing facility(Dunsandel) need to demonstrate “close association”. Lazy research again

[billkiapi]

Don’t forget that A2M have the patents over the testing process and control that so I don’t think they’re locked into Synlait the way everyone thinks they are, and they do have a supply agreement for years to come anyway and are already making new product at Yashili

[Balance]

At least for a while, Synlait (or Bright Dairy) and A2M need each other. After September 2027, China could be very different from now. It might not need IF if WWIII starts, in which case traditional dairy products would be in strong demand.

Me thinkth you have hit the nail on the head.

[bull....]

end game -

bright loan offer just PR
synliat goes into receivership
bright buys Dunsandel from receiver and a2 continue relationship with bright instead of synliat
other assets sold to who ever wants them
the chinese takeover of milk manufacturing in NZ continues

[Balance]

end game -

bright loan offer just PR
synliat goes into receivership
bright buys Dunsandel from receiver and a2 continue relationship with bright instead of synliat
other assets sold to who ever wants them
the chinese takeover of milk manufacturing in NZ continues

Wrong

Wrong

All wrong

[Bikeguy]

end game -

bright loan offer just PR
synliat goes into receivership
bright buys Dunsandel from receiver and a2 continue relationship with bright instead of synliat
other assets sold to who ever wants them
the chinese takeover of milk manufacturing in NZ continues

Appreciate you sharing your thoughts Bull, and it’s a fair view,

If the other 40% shareholders vote in favour could that put a spike in the wheel of above? Cheers

[bull....]

Appreciate you sharing your thoughts Bull, and it’s a fair view,

If the other 40% shareholders vote in favour could that put a spike in the wheel of above? Cheers

just guessing , thats my pick as i cant see how a recapitilization of the company makes any difference when a company has declining revenue and makes no money. just be back in the same boat after a while unless market conditions are forecast to radically change and quickly.

[bull....]

Wrong

Wrong

All wrong

your views may be clouded by your investment in there bonds . if you believe they will survive are you buying up big the bonds at 150% ? or the stock ?

[Bikeguy]

just guessing , thats my pick as i cant see how a recapitilization of the company makes any difference when a company has declining revenue and makes no money. just be back in the same boat after a while unless market conditions are forecast to radically change and quickly.

Totally fair and you could very well be right on the money, no of us knows and we are all allowed to take a stab at it👊

[whatsup]

end game -

bright loan offer just PR
synliat goes into receivership
bright buys Dunsandel from receiver and a2 continue relationship with bright instead of synliat
other assets sold to who ever wants them
the chinese takeover of milk manufacturing in NZ continues

Would they dare !

[whatsup]

end game -

bright loan offer just PR
synliat goes into receivership
bright buys Dunsandel from receiver and a2 continue relationship with bright instead of synliat
other assets sold to who ever wants them
the chinese takeover of milk manufacturing in NZ continues

Wouldnt they have to have OiO approval for this to happen ?

[Bikeguy]

I would wonder if Brights plan was receivership then it doesn’t make sense to put up the loan? Simply let SML default on the 130 mil and they get that outcome? No risk that shareholders will vote it in etc?

My thoughts are that A2 do not want to be part of a capital raise which will see them lose their blocking stake as Bright will increase their holding…

It’s such a pity, SML need a major volume customer, A2 need a manufacturer (and it helps that this one is a direct channel to their biggest market) I hope this gets sorted out and they make up and all make money again 👍

[Rawz]

If the loan goes through, then what? company is still buggered bcos its not producing enough op cashflows

[Bikeguy]

If the loan goes through, then what? company is still buggered bcos its not producing enough op cashflows

It’s a good question

[whatsup]

.275 another atl !

[bull....]

Dunsandel can keep trading as long as they meet samr regulations ? any new owner may or may not need to apply for new licence.to operate facilty. guess chinese company would have relationship with regulators making new licence quicker ?

[Waikaka]

$56 million total market cap, I am buying more at that price. Bet something is left after liquidation in the worst case scenario.

[Balance]

your views may be clouded by your investment in there bonds . if you believe they will survive are you buying up big the bonds at 150% ? or the stock ?

Emotions and sentiment cloud judgement - hope you know that.

Synlait would be in receivership already according to the many predictions made in the last 6 months but it is not.

The simple answer is Bright, Bright and Bright.

If anyone has dealt with the Chinese from China, they would know that 'face' is very important to them and when a state-owned enterprise spokesperson make a commitment, it is a commitment backed up by the enterprise.

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/majority-shareholder-support-steadfast

Go through what Bright representatives have said about their support for and of Synlait - and they are showing their support.

Can't help it if the market and commentators choose to think otherwise. As they say, money talks loudest.

As for the Chinese taking over dairy manufacturing in NZ, that is cuckooland stuff and will never happen.

PS. Like Sky TV (and Radius), I certainly will be buying during the CR to come. And yes, the lower the sp (cum-CR), the better.

[Balance]

$56 million total market cap, I am buying more at that price. Bet something is left after liquidation in the worst case scenario.

Wait for the CR which Synlait has already indicated will be announced in July or August.

[silverblizzard888]

Wait for the CR which Synlait has already indicated will be announced in July or August.

Yes the CR is the time to buy, removes a large amount of risk the company fails and begins the start of a turnaround.

[Bikeguy]

Emotions and sentiment cloud judgement - hope you know that.

Synlait would be in receivership already according to the many predictions made in the last 6 months but it is not.

The simple answer is Bright, Bright and Bright.

If anyone has dealt with the Chinese from China, they would know that 'face' is very important to them and when a state-owned enterprise spokesperson make a commitment, it is a commitment backed up by the enterprise.

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/majority-shareholder-support-steadfast

Go through what Bright representatives have said about their support for and of Synlait - and they are showing their support.

Can't help it if the market and commentators choose to think otherwise. As they say, money talks loudest.

As for the Chinese taking over dairy manufacturing in NZ, that is cuckooland stuff and will never happen.

PS. Like Sky TV (and Radius), I certainly will be buying during the CR to come. And yes, the lower the sp (cum-CR), the better.

This is well written, and I have to say having dealt with the Chinese in China the comment Balance has made about a spokesperson making public statements for a State Owned Enterprise is very very true, and the statements they are making are making it very clear what their position is, and what their actions regarding SML are going to be,

That they have now been so clear about their support and their intended actions I now feel means they will not be forming a JV with A2 for ownership,

It now seems very clear to me that SML are saying to A2 put up or lose your blocking stake, on top of having no board members on SML,

We are about to see A2 response

All will be revealed soon,

[Ggcc]

Wait for the CR which Synlait has already indicated will be announced in July or August.
How much can they raise via capital raise? Is it up to 10% of the value of the company or more?

[silverblizzard888]

This is well written, and I have to say having dealt with the Chinese in China the comment Balance has made about a spokesperson making public statements for a State Owned Enterprise is very very true, and the statements they are making are making it very clear what their position is, and what their actions regarding SML are going to be,

That they have now been so clear about their support and their intended actions I now feel means they will not be forming a JV with A2 for ownership,

It now seems very clear to me that SML are saying to A2 put up or lose your blocking stake, on top of having no board members on SML,

We are about to see A2 response

All will be revealed soon,

A2's only concern is securing their supply of IF, as long as they have a shareholding to represent a close relationship to satisfy the SAMR they are happy. They have been taking steps to diversify away from Synlait for a while now, but for the time being they still need Synlait, though the current events may have accelerated their pace.

[silverblizzard888]

How much can they raise via capital raise? Is it up to 10% of the value of the company or more?

Theres no limit as long as theirs shareholder approval. They will probably raise somewhere around $150m. They have often mention the bulk of the funds will be raise from asset sales from their North Island assets.

[bull....]

Emotions and sentiment cloud judgement - hope you know that.

Synlait would be in receivership already according to the many predictions made in the last 6 months but it is not.

The simple answer is Bright, Bright and Bright.

If anyone has dealt with the Chinese from China, they would know that 'face' is very important to them and when a state-owned enterprise spokesperson make a commitment, it is a commitment backed up by the enterprise.

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/majority-shareholder-support-steadfast

Go through what Bright representatives have said about their support for and of Synlait - and they are showing their support.

Can't help it if the market and commentators choose to think otherwise. As they say, money talks loudest.

As for the Chinese taking over dairy manufacturing in NZ, that is cuckooland stuff and will never happen.

PS. Like Sky TV (and Radius), I certainly will be buying during the CR to come. And yes, the lower the sp (cum-CR), the better.

chinese making loan offer is the face saving move. what happens after is not there fault it be a2 if they dont support loan and cap raise

which implies you already own stock in the company ? or are you meanng post cap raise if it were too happen.

[Balance]

This is well written, and I have to say having dealt with the Chinese in China the comment Balance has made about a spokesperson making public statements for a State Owned Enterprise is very very true, and the statements they are making are making it very clear what their position is, and what their actions regarding SML are going to be,

That they have now been so clear about their support and their intended actions I now feel means they will not be forming a JV with A2 for ownership,

It now seems very clear to me that SML are saying to A2 put up or lose your blocking stake, on top of having no board members on SML,

We are about to see A2 response

All will be revealed soon,

Cannot be clearer about the CR than from the announcement yesterday :

Proposed equity capital raising to help reset Synlait’s
balance sheet

To ensure that Synlait’s balance sheet is reset, Synlait is
planning to undertake an equity capital raising. Bright
Dairy has indicated it fully supports Synlait raising equity
capital, subject to terms being finalised, and all necessary
approvals being received, to more substantially re-set the
company’s equity and debt position to provide a platform
to return to sustainable growth for Synlait farmer suppliers
and all shareholders. The Synlait Board and its advisers are
continuing to progress the structure, terms and conditions
of a proposed equity raising and will further update
shareholders by the end of August, possibly earlier, by
market announcement.

In connection with the proposed equity raising, Synlait
is also proposing to concurrently refinance its Bank
Facilities. As part of that refinancing Synlait will be
seeking amended facilities that, upon the completion of
the equity raising, will be available to be drawn to meet
Synlait’s expected working capital and other corporate
requirements as well as allowing for the repayment of
the Bonds. Further information will be provided about the
refinancing once arrangements have been agreed with
the banks.

[whatsup]

.25 atm !!!

[Bikeguy]

A2's only concern is securing their supply of IF, as long as they have a shareholding to represent a close relationship to satisfy the SAMR they are happy. They have been taking steps to diversify away from Synlait for a while now, but for the time being they still need Synlait, though the current events may have accelerated their pace.

That’s a fair comment about security of supply…

[Lego_Man]

.25 atm !!!

Equity selling off, bonds rallying. Suggests Synlait survives, but existing shareholders are effectively diluted out of existence or otherwise extinguished.

[Balance]

Equity selling off, bonds rallying. Suggests Synlait survives, but existing shareholders are effectively diluted out of existence or otherwise extinguished.

Sp is cum-CR so who in their right mind would buy the shares now?

A replay of Sky TV all over again.

Keep your powder dry and wait ......


https://youtu.be/iDVuQi4gdtk?si=GqzdWh98rvm_NrGF&t=60

[Bikeguy]

Equity selling off, bonds rallying. Suggests Synlait survives, but existing shareholders are effectively diluted out of existence or otherwise extinguished.

If you take up your entitlement you have the same percentage as prior to the CR, so how do you get diluted out or extinguished? Cheers

[Newman]

How much can they raise via capital raise? Is it up to 10% of the value of the company or more?

I would think a CR of $180m to pay bondholders. The size of CR does not matter very much because both the loan and the majority of CR come from Bright. If A2M does not participate in CR, Bright would get close to 90% shareholding and make a compulsory takeover.

After the game ends, Bright should be able to enhance the performance of its assets or sell Pokeno/Dunsdale at the right time.

[bull....]

i just find it hard to see how they can survive

with 585m debt


based on there ebit forecast of 45 - 60m that would imply they could have only round 300m debt which they could service on those ebit figures
so that implies a cap raise of say 300m and issue of at least 2.5 billion shares :scared: at say 12c
probably need to raise more for a buffer if conditions dont improve

[billkiapi]

I would wonder if Brights plan was receivership then it doesn’t make sense to put up the loan? Simply let SML default on the 130 mil and they get that outcome? No risk that shareholders will vote it in etc?

My thoughts are that A2 do not want to be part of a capital raise which will see them lose their blocking stake as Bright will increase their holding…

It’s such a pity, SML need a major volume customer, A2 need a manufacturer (and it helps that this one is a direct channel to their biggest market) I hope this gets sorted out and they make up and all make money again 

because currently they’re on the hook for a 130M underwrite with no security. They need the loan to get it secured against assets. Receivership just means they burn 130M with nothing to show for it, and the bank is happy because they get paid

[Rawz]

i just find it hard to see how they can survive

with 585m debt
less 130 m loan
equals 455m debt still

based on there ebit forecast of 45 - 60m that would imply they could have only round 300m debt which they could service on those ebit figures
so that implies a cap raise of say 150m and issue of at least 1.2 billion shares :scared: at say 12c
probably need to raise more for a buffer if conditions dont improve

why are you deducting the 130m loan? its still debt

[Bikeguy]

because currently they’re on the hook for a 130M underwrite with no security. They need the loan to get it secured against assets. Receivership just means they burn 130M with nothing to show for it, and the bank is happy because they get paid

But the 130 mil loan is behind the banks so they would get nothing anyway?

[Bikeguy]

We are talking about a country that can smother the fallout of a 300 billion collapse (Evergrande)
So I personally don’t think 500 odd mil of debt is going to scare them…

[bull....]

why are you deducting the 130m loan? its still debt

haha your right in a rush off the top head stuff changed my figures

[Toddy]

Plenty of shares on offer for the risk takers out there.

Just don't get you Dr and Cr 's mixed up between your p&l and balance sheet.

[billkiapi]

But ahead of bonds, so secured is much better than joining the pool of unsecured.

[billkiapi]

We are talking about a country that can smother the fallout of a 300 billion collapse (Evergrande)
So I personally don’t think 500 odd mil of debt is going to scare them…

Bright is Shanghai municipality, A2M's mates are CCP (state) owned. If I was betting on this, I'd back state over city.

[Balance]

because currently they’re on the hook for a 130M underwrite with no security. They need the loan to get it secured against assets. Receivership just means they burn 130M with nothing to show for it, and the bank is happy because they get paid

Where’s the underwrite?

Bright has underwritten nothing at this stage.

Bright has offered a loan under certain conditions and that’s to be voted on. That’s not an underwrite.

[Bikeguy]

Bright is Shanghai municipality, A2M's mates are CCP (state) owned. If I was betting on this, I'd back state over city.

Just my opinion but I believe state runs everything in China, Shanghai municipality leaders are not independent of state, they work and answer directly to China ruling party…it probably doesn’t matter which state company you are in business with all roads lead back to Rome so to speak.

[Newman]

Bright is Shanghai municipality, A2M's mates are CCP (state) owned. If I was betting on this, I'd back state over city.

Bright is a state-owned company with its head office in Shanghai. It has well-established distribution and retail systems in the Yangtze River Delta, one of China's two wealth centers.

Eventually, Bright and a2M will part ways. After controlling Synlait, Bright will be able to sell a2 IF independently in Shanghai and nearby cities. Bright itself is a well-known brand.

[whatsup]

Bright is a state-owned company with its head office in Shanghai. It has well-established distribution and retail systems in the Yangtze River Delta, one of China's two wealth centers.

Eventually, Bright and a2M will part ways. After controlling Synlait, Bright will be able to sell a2 IF independently in Shanghai and nearby cities. Bright itself is a well-known brand.

So whats to stop Bright buying A2M then rolling up the SML mess, via a takeout or a receivership leaving red faces all round ?

[Bikeguy]

So whats to stop Bright buying A2M then rolling up the SML mess, via a takeout or a receivership leaving red faces all round ?

Be nice if they would😅

[Bikeguy]

Keep SML and buy A2 I mean…

[billkiapi]

You’re right- I mistook the letter of support on early April as an underwrite- I stand corrected

[Balance]

You’re right- I mistook the letter of support on early April as an underwrite- I stand corrected

Not a problem billkiapi. Thanks for clarification. I thought I had missed the underwrite agreement which would of course be very significant and material to how things are unfolding.

[silverblizzard888]

Shares at 22 cents now, couldn't resist buying a little today, will continue to buy more if the share price falls as the salvageable value of the assets start looking alright.

Value of their assets
Dairyworks $120m
North Island Assets $340m
South Island assets est $450m or more
Total $910m

At a 70% discount they would still be worth $637m ($637m - net debt $585m =$52m which would be the value they were trading at yesterday), which makes buying at this level quite appealing. Mind you if A2 along with Bright wanted Dunsandel they will be paying 100% worth in a bidding war, so total value in my mind is $772m ($772 - net debt $585m =$187m left over which leaves an upside)

[Balance]

Shares at 22 cents now, couldn't resist buying a little today, will continue to buy more if the share price falls as the salvageable value of the assets start looking alright.

Value of their assets
Dairyworks $120m
North Island Assets $340m
South Island assets est $450m or more
Total $910m

At a 70% discount they would still be worth $637m ($637m - net debt $585m =$52m which would be the value they were trading at yesterday), which makes buying at this level quite appealing. Mind you if A2 along with Bright wanted Dunsandel they will be paying 100% worth in a bidding war, so total value in my mind is $772m ($772 - net debt $585m =$187m left over which leaves an upside)

Will wait myself for the CR.

Keeping the powder dry.

[Rawz]

Shares at 22 cents now, couldn't resist buying a little today, will continue to buy more if the share price falls as the salvageable value of the assets start looking alright.

Value of their assets
Dairyworks $120m
North Island Assets $340m
South Island assets est $450m or more
Total $910m

At a 70% discount they would still be worth $637m ($637m - net debt $585m =$52m which would be the value they were trading at yesterday), which makes buying at this level quite appealing. Mind you if A2 along with Bright wanted Dunsandel they will be paying 100% worth in a bidding war, so total value in my mind is $772m ($772 - net debt $585m =$187m left over which leaves an upside)

When log prices dropped last year I watched as millions and millions of dollars worth of forestry machinery suddenly became seemingly worthless. No buyers could be found even at 50% discount on the sale price.

Your 30% discount maybe not enough mate

[silverblizzard888]

When log prices dropped last year I watched as millions and millions of dollars worth of forestry machinery suddenly became seemingly worthless. No buyers could be found even at 50% discount on the sale price.

Your 30% discount maybe not enough mate

You also have to consider Synlait's stuff comes with licenses and buyers for their products. Dunsandel comes with A2 and the chance to sell in China and North Island assets come with Abbott and chance to sell in the US. That aside theres plenty of Chinese interest that would swoop in for these assets unlike forestry machinery, but of course that is the risk that these assets get sold way below their value and you get nothing. Every opportunity is there because of the risk associated, no fear, no chances to be greedy.

[Rawz]

You also have to consider Synlait's stuff comes with licenses and buyers for their products. Dunsandel comes with A2 and the chance to sell in China and North Island assets come with Abbott and chance to sell in the US. That aside theres plenty of Chinese interest that would swoop in for these assets unlike forestry machinery.
thats true. wish you and all holders the best with this bet

[silverblizzard888]

thats true. wish you and all holders the best with this bet

Thanks mate! Just decided to be greedy when others are fearful. Bright to save us all!!! You could say we are in for a Bright future ;)

[Balance]

You also have to consider Synlait's stuff comes with licenses and buyers for their products. Dunsandel comes with A2 and the chance to sell in China and North Island assets come with Abbott and chance to sell in the US. That aside theres plenty of Chinese interest that would swoop in for these assets unlike forestry machinery, but of course that is the risk that these assets get sold way below their value and you get nothing. Every opportunity is there because of the risk associated, no fear, no chances to be greedy.

Well summarised, sb888 and good to see courage of conviction.

As the famous SAS motto goes, "WHO DARES WINS"!

You are a braver person than me as I still prefer the bonds at this stage and obviously will be considering the shares during the CR.

Some volume on the shares starting to go through now - all yours? :ohmy:

[Balance]

Thanks mate! Just decided to be greedy when others are fearful. Bright to save us all!!! You could say we are in for a Bright future ;)

Bright indeed!

Here's an older article which puts Bright's involvement in Synlait in some perspective :

https://www.farmersweekly.co.nz/markets/synlait-milks-bright-spark-in-turbulent-times/

[silverblizzard888]

Well summarised, sb888 and good to see courage of conviction.

As the famous SAS motto goes, "WHO DARES WINS"!

You are a braver person than me as I still prefer the bonds at this stage and obviously will be considering the shares during the CR.

Some volume on the shares starting to go through now - all yours? :ohmy:

Actually I would say the bonds are a smarter way of doing it, offering a fairly good return to compensate for the risk. Buying shares right now comes at the mercy of the CR and how much dilution will come and at what price, but if they come out of this alright then the upside will be fairly good.

Many hurdles to pass:

Loan approval - All comes down to A2 who is keeping everyone in suspense, but they don't have an incentive to rock the boat at potentially a huge expense to themselves. Doing anything that potentially causes them to lose the SAMR would not be ideal for them.

IF A2 decide to not approve the loan then Synlait will be at the mercy of bondholders and the banks. Bondholders have no incentive to call in their debt early as it does not improve the situation whether they call in their debt now or wait till it matures end of the year. They are still in good terms with their banks and the banks know Bright is there to back Synlait and there is a plan, so an extension will likely be reached with the condition of a successful CR to go ahead, since a CR would lower their risk exposure too.

Either way all roads lead to a CR we know Bright is supporting the CR so thats 39% of the raise guaranteed and they will likely absorb some of the shortfall along with other shareholders being interested to hop in, so likely will succeed. We know they have at least $130m to put into the capital raise since they will technically be giving Synalit the money to pay themselves back in exchange for more shares.

Asset Sale: Its quite clear they will be doing a partial fire sale and taking what they get offered. Dairyworks likely to be sold off for $80-100m and the North Island assets will to the very least be half sold off at the very least raise another $100m. At this point the North Island assets no longer matter in the scheme of things since they never really utilized them to the fullest and survival is on the line. Main thing is to keep Dunsandel and build back up from there.

[Bikeguy]

I completely understand the share price dropping lower and lower due to the fact of the coming credit raise, however.most credit raises I have seen are announced after a trading halt is called with the CR price set from the preceding 3 days prior to the credit raise announcement etc? Because SML have been announcing they are going to credit raise and then trading has just continued? Isn’t this information material therefore will influence the share price (which it clearly is?) is there the chance the price will be set from the preceding 3 days prior to SML making their FIRST clear announcement to the market to credit raise?

[blackcap]

One word: NO

[Rawz]

Blind Freddie could see the cap raise coming. Surely nobody is surprised or caught off guard?

[silverblizzard888]

I completely understand the share price dropping lower and lower due to the fact of the coming credit raise, however.most credit raises I have seen are announced after a trading halt is called with the CR price set from the preceding 3 days prior to the credit raise announcement etc? Because SML have been announcing they are going to credit raise and then trading has just continued? Isn’t this information material therefore will influence the share price (which it clearly is?) is there the chance the price will be set from the preceding 3 days prior to SML making their FIRST clear announcement to the market to credit raise?

The decline of the share price isn't necessarily all because of the capital raise, more so that if they can't raise capital then the shares could almost be worthless if they can't pay their debts and the assets get sold for scraps that only are enough to cover the debt. The share price has dropped a lot more lately because their debts are due, they are in a corner and there isn't any other option while also being at the mercy of A2.

Capital raising was always needed, but management somehow found themselves caught in the 5 stages of grief. First they denied that capital raising was necessary, then they displayed anger at the mention of it, while trying to bargain their way out by selling Dairyworks, they couldn't sell dairyworks, the company's prospects continued to decline so they got depressed and then now they finally accept they need to raise capital. All this while they could have raise capital earlier and at a much higher price.

Usually trade halts are called for material announcements that maybe be leaked and cause the share price to be unevenly traded to the detriment of existing shareholders. Here we have slowly descended into this and there is no terms for the capital raise, just more or less than one will happen. The whole market is properly informed so there is no need for a trade halt. You can look over at NTL in the same situation, they have declared a capital raise is imminent too.

Will the capital raise greatly affect the existing shares? Yes very much so, anyone buying right now should know a capital raise is coming end of August or afterwards; right after they have had the chance to negotiate the sales of their assets and to get a fair idea of how much left they need to raise to fill the gap. They have been in discussions for Dairyworks for a long time now and had interested buyers, so they will chase those leads back up, offer a discount and try to get it sold asap. North Island assets will take longer to discuss, so their aim will be to get atleast over $180m to pay back the bonds, since their loan with Bright can last over a year so they can wait till they've sold their North Island assets before paying Bright back or at least thats what makes more sense.

[carrom74]

Given the volume of trade in recent days and A2 not keen in supporting the loan. Wonder whether they are selling?? … SH notices should address this soon . I know this sounds crazy. But with Synlait anything is possible!

[silverblizzard888]

Given the volume of trade in recent days and A2 not keen in supporting the loan. Wonder whether they are selling?? … SH notices should address this soon . I know this sounds crazy. But with Synlait anything is possible!

A2 needs to retain its shareholdering for the SAMR to show a close relationship. In past meetings they have mentioned that there are companies with 1% ownership that show a close relationship. With capital raising coming and a good chance they won't participate, they will be fairly diluted, so selling any shares now would come at a risk of undermining that close relationship. Not worth salvaging a few million to wreck a billion dollar business.

[Bikeguy]

The decline of the share price isn't necessarily all because of the capital raise, more so that if they can't raise capital then the shares could almost be worthless if they can't pay their debts and the assets get sold for scraps that only are enough to cover the debt. The share price has dropped a lot more lately because their debts are due, they are in a corner and there isn't any other option while also being at the mercy of A2.

Capital raising was always needed, but management somehow found themselves caught in the 5 stages of grief. First they denied that capital raising was necessary, then they displayed anger at the mention of it, while trying to bargain their way out by selling Dairyworks, they couldn't sell dairyworks, the company's prospects continued to decline so they got depressed and then now they finally accept they need to raise capital. All this while they could have raise capital earlier and at a much higher price.

Usually trade halts are called for material announcements that maybe be leaked and cause the share price to be unevenly traded to the detriment of existing shareholders. Here we have slowly descended into this and there is no terms for the capital raise, just more or less than one will happen. The whole market is properly informed so there is no need for a trade halt. You can look over at NTL in the same situation, they have declared a capital raise is imminent too.

Will the capital raise greatly affect the existing shares? Yes very much so, anyone buying right now should know a capital raise is coming end of August or afterwards; right after they have had the chance to negotiate the sales of their assets and to get a fair idea of how much left they need to raise to fill the gap. They have been in discussions for Dairyworks for a long time now and had interested buyers, so they will chase those leads back up, offer a discount and try to get it sold asap. North Island assets will take longer to discuss, so their aim will be to get atleast over $180m to pay back the bonds, since their loan with Bright can last over a year so they can wait till they've sold their North Island assets before paying Bright back or at least thats what makes more sense.

You sum it up very well, thank you for such an in-depth post

[nztx]

Wonder if ASX will pull a random boomerang trick on listing across the ditch for SNL , like they
did for NTL - if the Auditor gets it's t*ts in a tangle on whether a going concern exists here or not ? ;)

[Newman]

The decline of the share price isn't necessarily all because of the capital raise, more so that if they can't raise capital then the shares could almost be worthless if they can't pay their debts and the assets get sold for scraps that only are enough to cover the debt. The share price has dropped a lot more lately because their debts are due, they are in a corner and there isn't any other option while also being at the mercy of A2.

Capital raising was always needed, but management somehow found themselves caught in the 5 stages of grief. First they denied that capital raising was necessary, then they displayed anger at the mention of it, while trying to bargain their way out by selling Dairyworks, they couldn't sell dairyworks, the company's prospects continued to decline so they got depressed and then now they finally accept they need to raise capital. All this while they could have raise capital earlier and at a much higher price.

Usually trade halts are called for material announcements that maybe be leaked and cause the share price to be unevenly traded to the detriment of existing shareholders. Here we have slowly descended into this and there is no terms for the capital raise, just more or less than one will happen. The whole market is properly informed so there is no need for a trade halt. You can look over at NTL in the same situation, they have declared a capital raise is imminent too.

Will the capital raise greatly affect the existing shares? Yes very much so, anyone buying right now should know a capital raise is coming end of August or afterwards; right after they have had the chance to negotiate the sales of their assets and to get a fair idea of how much left they need to raise to fill the gap. They have been in discussions for Dairyworks for a long time now and had interested buyers, so they will chase those leads back up, offer a discount and try to get it sold asap. North Island assets will take longer to discuss, so their aim will be to get atleast over $180m to pay back the bonds, since their loan with Bright can last over a year so they can wait till they've sold their North Island assets before paying Bright back or at least thats what makes more sense.

Excellent analysis on a technical level. On a strategic level, what would happen if Bright (or someone behind it) wants to move capital from the USA to New Zealand for security reasons?

[silverblizzard888]

Excellent analysis on a technical level. On a strategic level, what would happen if Bright (or someone behind it) wants to move capital from the USA to New Zealand for security reasons?

Then they would bring the money to NZ and Synlait would be a great reason to if they had capital in that area and wanted it in NZ. Not sure I get the motive of your question.

[silverblizzard888]

It seems Synlait's gross margin dropped significantly the minute Pokeno came online in late 2019, dropping from 16% to 5%, then later recovering to 9% with products being produced at Pokeno, though that has sinced dropped in the half year report to just over 4%. Makes me suspect that Pokeno maybe losing Synlait over $100m a year, especially in maintaining their milk supply contracts while not having the volume they had planned for. Explains why management have always kept hope that bringing in new business would solve the problem, but the new business never materialized. Add in over $40m in financial cost associated with their debt and you have over $140m going out the window from Pokeno and the debt, which if resolved would bring them back to profitability very quickly.

We know Dunsandel and Dairyworks are both very profitable operations, so if they were to get rid of Pokeno or sell off a large part and reduce debt at the same time, they would be profitable again. It never made sense how their margins dropped so heavily since they pay a similar milk price to Fonterra and for a long time was always in the double digits till Pokeno came online, yet Fonterra maintains healthy margins in the teens while Synlaits are in the single digits. A recent interview from the Chair of Synlait makes me suspect that this is the case.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/

“We have a very profitable business in Dunsandel [in Canterbury] - it’s a really strong business.”

Likewise, the consumer-oriented Dairyworks, which Synlait wants to sell to pay down debt, is also very profitable, he adds.

“So we have got two core assets that do very well."

Adams said Synlait needed to address issues of profitability and, clearly, Pōkeno.

“And in reality, if we can get to a point where we can resolve Pōkeno, and I am confident that we will, then the profitability of the other two will not get sucked into Pōkeno, which is the issue,” he said.

“We use the term ‘holding the nose’, but at that stage, if we deal with Pōkeno and we do what we are planning to do in terms of capital raise, then yes, it is positively salvageable.”

[Bikeguy]

It seems Synlait's gross margin dropped significantly the minute Pokeno came online in late 2019, dropping from 16% to 5%, then later recovering to 9% with products being produced at Pokeno, though that has sinced dropped in the half year report to just over 4%. Makes me suspect that Pokeno maybe losing Synlait over $100m a year, especially in maintaining their milk supply contracts while not having the volume they had planned for. Explains why management have always kept hope that bringing in new business would solve the problem, but the new business never materialized. Add in over $40m in financial cost associated with their debt and you have over $140m going out the window from Pokeno and the debt, which if resolved would bring them back to profitability very quickly.

We know Dunsandel and Dairyworks are both very profitable operations, so if they were to get rid of Pokeno or sell off a large part and reduce debt at the same time, they would be profitable again. It never made sense how their margins dropped so heavily since they pay a similar milk price to Fonterra and for a long time was always in the double digits till Pokeno came online, yet Fonterra maintains healthy margins in the teens while Synlaits are in the single digits. A recent interview from the Chair of Synlait makes me suspect that this is the case.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/

“We have a very profitable business in Dunsandel [in Canterbury] - it’s a really strong business.”

Likewise, the consumer-oriented Dairyworks, which Synlait wants to sell to pay down debt, is also very profitable, he adds.

“So we have got two core assets that do very well."

Adams said Synlait needed to address issues of profitability and, clearly, Pōkeno.

“And in reality, if we can get to a point where we can resolve Pōkeno, and I am confident that we will, then the profitability of the other two will not get sucked into Pōkeno, which is the issue,” he said.

“We use the term ‘holding the nose’, but at that stage, if we deal with Pōkeno and we do what we are planning to do in terms of capital raise, then yes, it is positively salvageable.”

Fantastic post, appreciate your work,
Your thoughts on the probability of them announcing an asset sale prior to announcing the CR?

[Ggcc]

It seems Synlait's gross margin dropped significantly the minute Pokeno came online in late 2019, dropping from 16% to 5%, then later recovering to 9% with products being produced at Pokeno, though that has sinced dropped in the half year report to just over 4%. Makes me suspect that Pokeno maybe losing Synlait over $100m a year, especially in maintaining their milk supply contracts while not having the volume they had planned for. Explains why management have always kept hope that bringing in new business would solve the problem, but the new business never materialized. Add in over $40m in financial cost associated with their debt and you have over $140m going out the window from Pokeno and the debt, which if resolved would bring them back to profitability very quickly.

We know Dunsandel and Dairyworks are both very profitable operations, so if they were to get rid of Pokeno or sell off a large part and reduce debt at the same time, they would be profitable again. It never made sense how their margins dropped so heavily since they pay a similar milk price to Fonterra and for a long time was always in the double digits till Pokeno came online, yet Fonterra maintains healthy margins in the teens while Synlaits are in the single digits. A recent interview from the Chair of Synlait makes me suspect that this is the case.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/

“We have a very profitable business in Dunsandel [in Canterbury] - it’s a really strong business.”

Likewise, the consumer-oriented Dairyworks, which Synlait wants to sell to pay down debt, is also very profitable, he adds.

“So we have got two core assets that do very well."

Adams said Synlait needed to address issues of profitability and, clearly, Pōkeno.

“And in reality, if we can get to a point where we can resolve Pōkeno, and I am confident that we will, then the profitability of the other two will not get sucked into Pōkeno, which is the issue,” he said.

“We use the term ‘holding the nose’, but at that stage, if we deal with Pōkeno and we do what we are planning to do in terms of capital raise, then yes, it is positively salvageable.”
Like many people and companies pre Covid, were caught with their pants down on the whole borrow to get wealthy scenario. Currently loads of people starting to sell their houses and businesses to raise money to pay off their debts. SML paid too much for lots of their stuff and now need to sell it in a declining market. Pokeno will be a fire sale, Dairyworks might sell for $55-70 million (or less), but Dunsandel might be a fair price. If the company goes into liquidation I feel Bright and A2 will buy Dunsandel together as a partnership, Bright may even get some shares in A2 as sweetener part of a deal. Again this is just my point of view and as a non shareholder, I don't mind if they keep existing.

[carrom74]

Pokeno is the white elephant-as we all know and selling shouldn’t be that of a problem I guess. As Fonterra is selling its brands and closing down old and tired factories,and since it’s focus has changed to be more “primary “ - they could buy …

https://www.nzherald.co.nz/waikato-news/news/fonterra-to-close-plants-in-te-rapa-and-waitoa-to-focus-on-high-value-products/EAVANFWWOVFBTPZYJWRSHPES24/

[Balance]

Like many people and companies pre Covid, were caught with their pants down on the whole borrow to get wealthy scenario. Currently loads of people starting to sell their houses and businesses to raise money to pay off their debts. SML paid too much for lots of their stuff and now need to sell it in a declining market. Pokeno will be a fire sale, Dairyworks might sell for $55-70 million (or less), but Dunsandel might be a fair price. If the company goes into liquidation I feel Bright and A2 will buy Dunsandel together as a partnership, Bright may even get some shares in A2 as sweetener part of a deal. Again this is just my point of view and as a non shareholder, I don't mind if they keep existing.

Bright is China's second largest food manufacturing & distribution company - I suspect that most NZers (including the media) and some posters have not thought through the implication of that.

[nztx]

Bright is China's second largest food manufacturing & distribution company - I suspect that most NZers (including the media) and some posters have not thought through the implication of that.


Look no further than Silver Fern Farms & a number of other operators in the Meat sector.

Then look at PGW when control (or they think they have strings to pull) heads offshore

All part of foreign desires to secure their supply chains, by acquiring ownership of more of the production & supply chain at source in the target supplier country.

When the boots on the other foot & Kiwi companies try to get a foothold in for example China or elsewhere - how does that sometimes turn out ? ;)

Any Sectors which have not seen 'wholesale foreign based takeovers & buyouts' here left ? ;)

[JimmyTrade]

Pokeno is the white elephant-as we all know and selling shouldn’t be that of a problem I guess. As Fonterra is selling its brands and closing down old and tired factories,and since it’s focus has changed to be more “primary “ - they could buy …

https://www.nzherald.co.nz/waikato-news/news/fonterra-to-close-plants-in-te-rapa-and-waitoa-to-focus-on-high-value-products/EAVANFWWOVFBTPZYJWRSHPES24/


Fonterra has the capability to make more ingredients (dryer capacity) than milk supply and milk distribution issue with such large dryers being built in the recent decade and arguably have reached "peak milk".

Moving towards only ingredients and foodservice to give the business more stable reliable flows of revenue seems a bit short-sighted when higher margins and pricing power is coming from the consumer goods but is something Fonterra hasn't executed very well. Products like Anmum come to mind, just aren't marketing as well as other brands in the same categories.

[Balance]

Look no further than Silver Fern Farms & a number of other operators in the Meat sector.

Then look at PGW when control (or they think they have strings to pull) heads offshore

All part of foreign desires to secure their supply chains, by acquiring ownership of more of the production & supply chain at source in the target supplier country.

When the boots on the other foot & Kiwi companies try to get a foothold in for example China or elsewhere - how does that sometimes turn out ? ;)

Any Sectors which have not seen 'wholesale foreign based takeovers & buyouts' here left ? ;)

Try telecommunications.

Try power generation.

Try airlines.

Try horticultural industry.

Try dairy industry.

Not the fault of other countries that many NZ companies have no idea how to invest successfully overseas. They should learn from Graeme Hart and Zuru perhaps?

[whatsup]

Pokeno is the white elephant-as we all know and selling shouldn’t be that of a problem I guess. As Fonterra is selling its brands and closing down old and tired factories,and since it’s focus has changed to be more “primary “ - they could buy …

https://www.nzherald.co.nz/waikato-news/news/fonterra-to-close-plants-in-te-rapa-and-waitoa-to-focus-on-high-value-products/EAVANFWWOVFBTPZYJWRSHPES24/

So with the biggest employer at Pokeno struggling to survive where does that leave, the business owners, home owners and the banks in Pokeno , Im betting that there are lots of answers needed !

[Perky]

I’m not sure there are Banks in Pokeno.

Pookeno or as it is called by majority Pokeno…Po means night and Keno means underworld or night of death…oh dear synlait
Pookeno is world famous for Large ice creams, Bacon and sausages.
The town changed its name to jenniferAnn.com for 1 year in 2000.
Possum Bourne is buried in the Pookeno cementry and the famous pie stealing scene from goodbye pork pie movie was filmed there.
Pookeno also has it own whiskey distillery Pokeno Whiskey

so really the ****show at the milk factory is just another chapter in Pokeno world famous history.

[carrom74]

Fonterra has the capability to make more ingredients (dryer capacity) than milk supply and milk distribution issue with such large dryers being built in the recent decade and arguably have reached "peak milk".

Moving towards only ingredients and foodservice to give the business more stable reliable flows of revenue seems a bit short-sighted when higher margins and pricing power is coming from the consumer goods but is something Fonterra hasn't executed very well. Products like Anmum come to mind, just aren't marketing as well as other brands in the same categories.

In the early 2000”s Fonterra had about 133 brands and the then CEO was entrusted to reduce them. Now fast forward, they are still selling their brands and closing old factories. Also if pokeno does get sold to them, the farmers could come back… which is also a challenge to Synlait ( cessation notices).

https://www.nzherald.co.nz/business/fonterra-making-a-global-name-for-itself/OJSRBISILFE7KTHSME2BBTJJPI/

Agree with the “peak milk” theory. Good point.

I am of the opinion that Fonterra would be watching keenly on how things unfold.

[whatsup]

I’m not sure there are Banks in Pokeno.

Pookeno or as it is called by majority Pokeno…Po means night and Keno means underworld or night of death…oh dear synlait
Pookeno is world famous for Large ice creams, Bacon and sausages.
The town changed its name to jenniferAnn.com for 1 year in 2000.
Possum Bourne is buried in the Pookeno cementry and the famous pie stealing scene from goodbye pork pie movie was filmed there.
Pookeno also has it own whiskey distillery Pokeno Whiskey

so really the ****show at the milk factory is just another chapter in Pokeno world famous history.

DAAAAH, the banks have lent the money to the home owners via a mortgage !
If the factory closes who will employ all of the citizens of Pokeno and if no employers who will buy the houses ?

[Perky]

Pokeno has around 6000 residents
Pokeno Synlait factory has approx only 110 workers I believe.

In NZ the average house has 2.7 occupants so maybe 2000 houses in Pokeno so even if every synlait worker lived in Pokeno they would occupy only 40 of these houses.

In fact Pokeno has 2 big milk processing factories right beside each other..Synlait and Yashilli

Maybe some of the displaced workers could go next door for work?

https://images.app.goo.gl/atse4YUVsoBCHjDf9

I think the banks and you can sleep tight…Pokeno would survive without Synlait

[billkiapi]

Dunsandel is profitable because of A2M is my understanding

[Balance]

Dunsandel is profitable because of A2M is my understanding

And A2M is profitable because of Dunsandel.

Match made in heaven but now, going separate ways in 2027.

So think through why Bright wants Synlait.

[Bikeguy]

And A2M is profitable because of Dunsandel.

Match made in heaven but now, going separate ways in 2027.

So think through why Bright wants Synlait.

Could you spell it out for me please Balance? I’m interested, cheers👊

[Balance]

Could you spell it out for me please Balance? I’m interested, cheers��

Bright can switch Synlait's production and manufacturing to Bright's own products over the next 3 years.

Think of how competitive Synlait (owned by Bright) will be at the very low cost that Bright will get Synlait’s assets at.

As mentioned before, many do not seem aware that Bright is China's second biggest food manufacturing and distribution company.