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bull....
11-07-2024, 11:29 AM
share price might jump biggly after a yes vote ? make rights issue price much higher tham most people think
Bikeguy
11-07-2024, 11:33 AM
Bright and A2M would choose the next move to maximize their benefits. Selling assets at a discount might not be a good choice for them. Building the Pokeno plant was expensive and challenging. Why would Bright want to sell Pokeno when it has access to capital at interest rates lower than small shareholders could expect?
Intelligent points
Bikeguy
11-07-2024, 12:08 PM
SB888, that trade at .20 has paid off big time mate, well done!!
Charlie
11-07-2024, 12:18 PM
I bought in at .24 and very happy too . 5% of my holdings so didnt want to risk any more.
bull....
11-07-2024, 12:26 PM
if this jumps to a dollar ? ( hopefully after vote , wishing hard ) make a massive difference to money needed for raise.
whatsup
11-07-2024, 12:33 PM
.28 open and .41 high so far for the day, fortune favours the brave !! well done all
Balance
11-07-2024, 12:42 PM
SB888, that trade at .20 has paid off big time mate, well done!!
Well done indeed!
He who dares wins!
Toddy
11-07-2024, 01:43 PM
Yes, well done guys. Way braver than me taking on the big boys in town.
Balance
11-07-2024, 02:40 PM
Answer from Chairman to question about size of CR - "hundreds of millions of dollars."
Sounding like $200m to $250m to me.
Balance
11-07-2024, 02:57 PM
Loan proposal approved - clear from meeting.
Proxy votes - 59m or 27% in favour so A2M would have been defeated anyway if it voted against the loan.
235,000 shares against the proposal.
Newman
11-07-2024, 03:21 PM
Answer from Chairman to question about size of CR - "hundreds of millions of dollars."
Sounding like $200m to $250m to me.
The capital raising would be large enough to pay back bonds, further reduce bank debt, retain farmers, enhance Pokeno productivity, and produce a good after-tax profit to please shareholders.
Could a CR of $250-300m and a share price return to $1 before Christmas be expected?
Toddy
11-07-2024, 03:26 PM
The capital raising would be large enough to pay back bonds, further reduce bank debt, retain farmers, enhance Pokeno productivity, and produce a good after-tax profit to please shareholders.
Could a CR of $250-300m and a share price return to $1 before Christmas be expected?
Yeah sure, if they raised 218m off current shareholders that's a buck a share into the bucket.
silverblizzard888
11-07-2024, 03:27 PM
Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.
Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.
Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.
Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.
Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.
whatsup
11-07-2024, 03:33 PM
With a M C of circa $60 mil and $250,000,000 funding to raise ?
silverblizzard888
11-07-2024, 03:35 PM
With a M C of circa $60 mil and $250,000,000 funding to raise ?
The Chair did say they will be raising several times their market cap, so yes it looks like the case. If the share price is higher by end of August then less dilution.
bull....
11-07-2024, 03:39 PM
Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.
Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.
Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.
Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.
Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.
you were right when you said a while back at just over 20c that liquidation value was worth more than current price. probably still case now. so agree probably good value still with uncertainty significantly reducing.
Toddy
11-07-2024, 03:44 PM
So what kind of carrot are they offering farmers to stay or sign up.
The farmers will be a big winner out of today's cap raising announcement for sure.
silverblizzard888
11-07-2024, 03:57 PM
So what kind of carrot are they offering farmers to stay or sign up.
The farmers will be a big winner out of today's cap raising announcement for sure.
Can’t remember precisely but the farmers wanted upfront payment incentives and synlait promising competitive milk pricing to fonterra
So what kind of carrot are they offering farmers to stay or sign up.
The farmers will be a big winner out of today's cap raising announcement for sure.
Will they ? So who is left digging repeated holes in their front garden for CR after CR ?
Any news on a future dividend out of this or do the Chinese lenders get first lick of the lollypop right up the top of the queue .. or maybe better dodging the mayhem ahead in future rounds of craziness .. by simply leaving funds in the bank on high interest ? :)
RupertBear
11-07-2024, 04:16 PM
Very impressed with the Chairs performance and lots of interesting updates provided. First off great to have the resolution passed and loan from Bright on its way, next step will be capital raising. There was some good updates provided.
Asset Sales
Sounds like Dairyworks is off the table, theres no strong offers and Synlaits sick of being lowballed and most probably Pokeno too since they think the asset will be important for future growth, but will depend on how the CR goes.
Capital Raising
With asset sales unlikely to be sold off now and the Chair speaking about 'hundreds' of millions being raised, that will be their first target to raise enough to pay down debt. Asset sales will only be back on the table if they fail to raise the amount they want.
Pokeno
An important update on Pokeno was provided, the Chair spoke about Pokeno having supplied Abbott for 12 months and that the ramp up is still to come for more plant based products, they had only just completed a testing phase for another of their products, so ramp up soon after. They are also working with Bright to create a new product too. Pokeno cash burn will be solved soon with hints that 2025 Synlait will be cashflow positive.
Share price
Share price has rebounded well and with things looking much brighter going forward it can still continue to perform. At 37.5 cents and an $81m mcap its still looking like good value.
I was also very impressed with the Chairs performance.
Toddy
11-07-2024, 04:22 PM
Will they ? So who is left digging repeated holes in their front garden for CR after CR ?
Any news on a future dividend out of this or do the Chinese lenders get first lick of the lollypop right up the top of the queue .. or maybe better dodging the mayhem ahead in future rounds of craziness .. by simply leaving funds in the bank on high interest ? :)
Farmers will win for sure.
Chinese will win.
A2, secure short term product.
Retail investors need to find big $$$ to keep the faith.
I ways wonder where Kiwi mum and dad's are getting this money from. It's no IFT cap raise for sure. This is a rescue package, think RYM, FBU etc
Snoopy
11-07-2024, 05:46 PM
I was also very impressed with the Chairs performance.
Four legs at the start of the performance and four legs at the end. Not bad, although in fairness that kind of performance is expected these days. What about the person who was sitting in the chair? How did he do?
SNOOPY
Balance
11-07-2024, 05:58 PM
Farmers will win for sure.
Chinese will win.
A2, secure short term product.
Retail investors need to find big $$$ to keep the faith.
I ways wonder where Kiwi mum and dad's are getting this money from. It's no IFT cap raise for sure. This is a rescue package, think RYM, FBU etc
Synlait will go on from here to recover and prosper - that is my belief.
Covid dealt a very cruel blow to any number of companies and sadly, some did not survived.
Think of the number of NZ companies which needed to do CR in the last 3 years to survive. And how they have gone on to recover and do well.
Synlait is going to survive - it is fortunate to have a major shareholder with deep pockets, commitment and distribution in a huge market in China which wants dairy products from NZ.
Synlait will go on from here to recover and prosper - that is my belief.
Covid dealt a very cruel blow to any number of companies and sadly, some did not survived.
Think of the number of NZ companies which needed to do CR in the last 3 years to survive. And how they have gone on to recover and do well.
Synlait is going to survive - it is fortunate to have a major shareholder with deep pockets, commitment and distribution in a huge market in China which wants dairy products from NZ.
Another A2M upwards trajectory .. headed off in direction of a big 20 .. or maybe not so soon ? :)
RupertBear
11-07-2024, 09:24 PM
Four legs at the start of the performance and four legs at the end. Not bad, although in fairness that kind of performance is expected these days. What about the person who was sitting in the chair? How did he do?
SNOOPY
Ok it took me a while Snoopy but I finally got it! :lol:
So to be more precise, I thought George Adams, the man in the chair, was excellent. :)
Balance
11-07-2024, 09:44 PM
Ok it took me a while Snoopy but I finally got it! :lol:
So to be more precise, I thought George Adams, the man in the chair, was excellent. :)
Agreed. Given that the approval was in the bag (proxy votes), I thought he was patient, frank and as forthcoming as could be with all the questions throw at him. Best in mind that he is new as chairman but comes across as very well briefed.
One hopes that Synlait will achieve the cashflow positive outcome in 2025 he alerted to.
Toddy
12-07-2024, 07:38 AM
Forbar say RYM 300 percent returns. Makes you think, puting even MORE money in to Synlait would probably be a slow painful wait to earn a decent return on your capital.
I understand that this waiting game on the outcome of this rescue package has been fun for many. But the opportunity cost of reinventing will be massive in this downward interest rate environment. The fund managers will find it a hard sell to the story to invest more funds to the big boss.
Balance
12-07-2024, 08:17 AM
Forbar say RYM 300 percent returns. Makes you think, puting even MORE money in to Synlait would probably be a slow painful wait to earn a decent return on your capital.
I understand that this waiting game on the outcome of this rescue package has been fun for many. But the opportunity cost of reinventing will be massive in this downward interest rate environment. The fund managers will find it a hard sell to the story to invest more funds to the big boss.
The issue with Synlait going forward is not whether its fortunes will recover - it will imo. The factors which brought this company close to receivership (but for Bright) are now well known and imo, reversible.
The big issue for me is whether the interests of minorities are in synch with that of Bright who is expected to increase its shareholding beyond its current level. Bright controlling Synlait at an operational level raises the all important question of where Synlait’s future profits exporting to the huge China market will reside - in NZ or in China via ‘transfer pricing’.
Bright is not rescuing Synlait for free!
So shareholders and potential investors need to watch that carefully before putting in more funds via the CR.
Different for those who are currently not invested - as can be seen in recent times, brave & shrewd investors like ssb888 can double their monies by buying off the panic-stricken investors.
bull....
12-07-2024, 09:41 AM
Adams said the company could now get on with a capital raising through the sale of new shares, which was likely to be "several hundred million dollars" but would avoid the need to sell assets. Details would be released next month, but the matter was complicated and needed to be fair to all.
"We have a complex relationship with two major shareholders, which we've got to resolve to ensure we can deliver an equity raise ... we've also got to take into account the volatility of our share price and bond price."
https://www.rnz.co.nz/news/business/521906/synlait-milk-shareholders-back-large-loan-from-chinese-major-shareholder
silverblizzard888
12-07-2024, 09:52 AM
In my view Bright probably sees their investment in Synlait as a means of growing their business into foreign markets that would otherwise be harder to enter themselves, so they would to that extent never really want to fully own Synlait as theres benefits for it to remain NZX listed and to maintain local shareholders. Hence why they have backed Synlait even though they never fully utilised Synlait for their benefit, though they are now working on a new product together that will see Synlait potentially producing a lot more product for them.
Synlait has always been a growth aspired company hence why maintaining Pokeno was so important to them even though it has nearly taken them under. If they make it through this with a successful capital raising they become a whole lot stronger and have a lot of potential to become a much better company than they have been in the past. I like the stance of the new Chair, he seems to have all four feet on the ground (pun intended), a more traditional finance guy who doesn't run before he walks and the perfect guy to help reset the A2 relationship.
Hopefully, Adams and the team can quickly address the exclusivity dispute with A2M in the near future also (secondary priority) as that's the other fly in the ointment. I was impressed with his pragmatism, so hopefully that leads to some good outcomes.
silverblizzard888
12-07-2024, 10:16 AM
Adams said the company could now get on with a capital raising through the sale of new shares, which was likely to be "several hundred million dollars" but would avoid the need to sell assets. Details would be released next month, but the matter was complicated and needed to be fair to all.
"We have a complex relationship with two major shareholders, which we've got to resolve to ensure we can deliver an equity raise ... we've also got to take into account the volatility of our share price and bond price."
https://www.rnz.co.nz/news/business/521906/synlait-milk-shareholders-back-large-loan-from-chinese-major-shareholder
The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote
The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote
Their share price is quite volatile, so 'several' times market cap could be a 'few' or otherwise!
bull....
12-07-2024, 10:40 AM
The referenced quotes sound like it was from yesterdays meeting, I don't recall the Chair saying the word 'several' hundred million, he just said hundreds of millions, but he did use the word 'several' when he said they would need several times their market cap. Not sure if i missed the word or its a misquote
if its several hundred milliuon fits in with my thinking earlier in the thread of a billion odd shares need issued in the raise, but of course if the price rises more this reduces as the issue price would be higher. in the scheme of things its really not important as there financial position after raise is what matters. so bigger the better. both a2 and bright got plenty of coin.
whatsup
12-07-2024, 11:04 AM
I cannot understand why anyone is buying SML shares atm when one could buy the rights at what imo will be a massive fire sale !
silverblizzard888
12-07-2024, 11:05 AM
if its several hundred milliuon fits in with my thinking earlier in the thread of a billion odd shares need issued in the raise, but of course if the price rises more this reduces as the issue price would be higher. in the scheme of things its really not important as there financial position after raise is what matters. so bigger the better. both a2 and bright got plenty of coin.
The bigger the raise the better the company will be to put this debt issue behind them, but of course the dilution will be big and harsh, though if the CR is too small then it risk this debt issue coming back to bite them again.
$300-400m raise would put to bed any issue of debt and all steam ahead for growth
$200-300m raise is an optimal raise for company and shareholders, to reduce debt to a comfortable level and focus on getting back to cashflow positive and paying down debt
$100-200m raise would not likely be enough to reduce debt and would look to North Island asset sales.
clearasmud
12-07-2024, 11:11 AM
I cannot understand why anyone is buying SML shares atm when one could buy the rights at what imo will be a massive fire sale !
Because you get the rights for free.
whatsup
12-07-2024, 11:15 AM
Because you get the rights for free.
Im talking about new S Hers !
bull....
12-07-2024, 11:27 AM
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
prob only want 200m debt at most and hope the issue price is higher than 12c
bull....
12-07-2024, 11:30 AM
hopefully the cap raise allows participates to oversubscribe there current holdings . that suit bright and some others
blackcap
12-07-2024, 11:58 AM
Because you get the rights for free.
I think you are right. You get the rights attached to your shares. If the rights issue is done at say 20 cents and the SP is trading at 30 cents, the rights will have a value of about 10 cents. It all depends on the future prospects at the end of the day as to how well the SP will hold up.
clearasmud
12-07-2024, 12:05 PM
I think you are right. You get the rights attached to your shares. If the rights issue is done at say 20 cents and the SP is trading at 30 cents, the rights will have a value of about 10 cents. It all depends on the future prospects at the end of the day as to how well the SP will hold up.
Yes if you buy shares now the rights are worth quite a bit as your share purchase now will only be a fraction of your Total investment.
NTA of the shares now must be about $2.50 to give you an idea.
whatsup
12-07-2024, 12:08 PM
Yes if you buy shares now the rights are worth quite a bit as your share purchase now will only be a fraction of your Total investment.
NTA of the shares now must be about $2.50 to give you an idea.
You really think so with all of the problems that they have out there, biggest one imo is farmer supply issue, where is their future with the farmer suppliers bailing out of their supply contracts, talk about stranded assets !!!
Balance
12-07-2024, 12:12 PM
You really think so with all of the problems that they have out there, biggest one imo is farmer supply issue, where is their future with the farmer suppliers bailing out of their supply contracts, talk about stranded assets !!!
Farmers are well known for their loyalty to processor .... NOT!
Whoever pays the most and is perceived as reliable payers get the produce.
silverblizzard888
12-07-2024, 12:20 PM
Interview with a Synlait supplier, but nothing new said. Supplier was supportive, main concern is certainty for the future.
https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/cameron-henderson-synlait-supplier-on-the-companys-shareholders-voting-in-favour-of-a-130m-loan/
Toddy
12-07-2024, 12:29 PM
Farmers are well known for their loyalty to processor .... NOT!
Whoever pays the most and is perceived as reliable payers get the produce.
Yes, it's called business. It's no different from mum and dad's shopping around electricity providers for a good deal.
And Fonterra will match the offer for certain customers, just like your bank matching another banks discounted mortgage rate.
silverblizzard888
12-07-2024, 01:47 PM
Yes, it's called business. It's no different from mum and dad's shopping around electricity providers for a good deal.
And Fonterra will match the offer for certain customers, just like your bank matching another banks discounted mortgage rate.
Mind you Fonterra also expects its suppliers to stump on money in the hundreds of thousands or even millions for shares in Fonterra to match how much they supply, for the farmers without the extra capital its a bit of a stretch, so its not a straight forward swap.
Toddy
12-07-2024, 02:04 PM
Mind you Fonterra also expects its suppliers to stump on money in the hundreds of thousands or even millions for shares in Fonterra to match how much they supply, for the farmers without the extra capital its a bit of a stretch, so its not a straight forward swap.
Yes, deal structures can take on many forms like part payments for investment capital. Farmers dont mind as long as they are earning a return on the capital. Also the processors don't like to have too many stretched farmers on their books as that can lead to many other issues.
Having my capital tied up in the Kiwifruit shares (Zespri and Eastpack) is definitely not ideal. But as long as they beat the cost of capital and it secures my pack out then I don't mind.
And the banks are allowed to include Zespri shares as a capital asset for lending purposes.
Balance
12-07-2024, 04:10 PM
Shareholders really should be turning their attention to influencing the CR terms and conditions so that it's a fair CR to all shareholders.
Forgone conclusion that the CR will be dilutary but it does not have to be unfair to other shareholders.
Remember that a shareholders' vote is required to approve the CR so there's one more hurdle Synlait has to clear before the CR goes ahead and Synlait is recapitalised.
winner69
17-07-2024, 08:39 AM
Seems Synlait management still have no idea what’s going on
Guidance withdrawn …but we’ll fiddle with ebitda numbers to give the bank the $45m they promised
Incredible
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/434597/422859.pdf
Toddy
17-07-2024, 08:54 AM
This company provides plenty of lessons over and over for investors.
It basically ticks almost every box imaginable on why you should not invest and how to lose money investing.
Newman
17-07-2024, 10:09 AM
Seems Synlait management still have no idea what’s going on
Guidance withdrawn …but we’ll fiddle with ebitda numbers to give the bank the $45m they promised
Incredible
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/434597/422859.pdf
Synlait's performance will remain unsatisfactory until a capital raising is completed to pay off a large part of its debt and Pokeno stops losing money. This situation is well known before the $130 m loan vote.
bull....
17-07-2024, 10:36 AM
Synlait's performance will remain unsatisfactory until a capital raising is completed to pay off a large part of its debt and Pokeno stops losing money. This situation is well known before the $130 m loan vote.
exactly. downgrade again is no surprise
exactly. downgrade again is no surprise
SML reaffirmed guidance only 6 weeks ago. So it really is a surprise. Like W69 says SML management really have no idea what is going on in their business
bull....
17-07-2024, 10:57 AM
SML reaffirmed guidance only 6 weeks ago. So it really is a surprise. Like W69 says SML management really have no idea what is going on in their business
read the announcement. due to costs of strategic review and shipping delays. if you didnt believe that a furthur softening in demand is possible then you have not done your homework as they said this was possible as well in previous announcements
read the announcement. due to costs of strategic review and shipping delays
all these guys do is manufacture and ship. Literally their business.
6 weeks ago....
come on dont fall for their excuses
bull....
17-07-2024, 10:59 AM
all these guys do is manufacture and ship. Literally their business.
6 weeks ago....
come on dont fall for their excuses
said timing issue so that implies revenue will be in next period
whatsup
17-07-2024, 11:04 AM
Hasent the farm gate milk price been down graded several times over the last month, if so I wonder if this is now being reflected in the SML update ?
billkiapi
17-07-2024, 12:29 PM
How can they reasonably obtain a shareholder vote and then announce a serious problem for the profitability obligations they agreed to 4 days later?
Toddy
17-07-2024, 12:51 PM
Well done regulators for not interfering in the process and allowing this company to survive.
Good macro vision.
Newman
23-07-2024, 10:56 AM
A New Zealand sheep milk company has scored a big win in China - gaining brand registration for its infant milk formula.
https://www.nzherald.co.nz/nz/spring-sheep-waikato-based-sheep-milk-company-scores-a-big-win-in-china/F4UFOAPCUBGTNFMY2C75G3E2GE/
kiora
23-07-2024, 12:05 PM
A New Zealand sheep milk company has scored a big win in China - gaining brand registration for its infant milk formula.
https://www.nzherald.co.nz/nz/spring-sheep-waikato-based-sheep-milk-company-scores-a-big-win-in-china/F4UFOAPCUBGTNFMY2C75G3E2GE/
Wow This big?
https://www.rnz.co.nz/news/business/470392/new-image-group-buys-beauty-products-company-nutrimetics
After this
https://www.rnz.co.nz/news/business/470013/takeover-offer-lands-new-image-group-with-1-point-5m-penalty
Newman
16-08-2024, 10:55 AM
Pressure on Synlait’s independent directors ahead on capital raise - Stock Takes
https://www.nzherald.co.nz/business/decision-time-for-synlaits-independent-directors-stock-takes/KOZVTWOGVRHIDIQQJOLB52QOME/
Pay walled.
Interestingly, the report presented a view of some shareholders in two paragraphs below:
"Synlait’s current share price suggests the business is worth $62m. Yet when you look at the sum of the assets and strip out debt the value of the business is conservatively worth just over $600m.
In other words, Synlait is worth more dead than alive under any scenario to resuscitate the business that does not reflect its intrinsic value".
Newman
16-08-2024, 11:08 AM
Synlait & The a2 Milk Company settle disputes.
Does this suggest that capital raising is agreed upon between them?
Newman
16-08-2024, 11:24 AM
With a combined shareholding of 59%, Bright and A2 Milk would have a high chance of getting the vote on the capital raising pass (75%), though some institutional and retail shareholders would be unhappy.
Bikeguy
16-08-2024, 11:43 AM
I feel this is pretty good, A2 wanting another manufacturing slot etc shows these guys are going to keep it together for a while yet, at least till 2027, so has to begin to bring some confidence back…interesting timing to? CR just around the corner…
Sideshow Bob
16-08-2024, 11:45 AM
https://www.nzx.com/announcements/436291
ynlait Milk Limited (Synlait) and The a2 Milk Company have conditionally agreed to resolve all disputes subject to arbitration, including those regarding exclusivity, pricing, and other issues.
Synlait CEO Grant Watson commented: “Settling these disputes is another positive step forward in our business recovery plan. With the disputes behind us, we are pleased to be able to confirm to our shareholders The a2 Milk Company’s support for our upcoming equity raise. This marks genuine progress for Synlait – we are delivering on the turnaround actions needed to reset our performance and better position the company for the future.”
A summary of the settlement is set out on the next page. However, notably:
- Synlait has agreed that the exclusivity it has under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for a2 Platinum® and other nutritional products will cease to apply from 1 January 2025; however, Synlait expects to continue to produce all products under the NPMSA in the short term.
- Synlait will continue to hold the Chinese regulatory State Administration for Market Regulation (SAMR) registration (currently expiring September 2027), attached to its Dunsandel facility, after settlement takes effect. The registration is for The a2 Milk Company’s Chinese labelled 至初® Infant Formula (stages one, two and three). Despite the exclusive supply arrangements ending, Synlait expects that The a2 Milk Company’s China label products will continue to be produced at Synlait’s Dunsandel facility unless The a2 Milk Company can obtain its own SAMR registration to manufacture those products.
- Synlait will make available to The a2 Milk Company an additional SAMR registration slot at Dunsandel for a potential new China label registered product – The a2 Milk Company and Synlait will work together to develop the new product, prepare the SAMR registration dossier and seek registration from SAMR by December 2029.
- As part of the settlement, The a2 Milk Company will make a one-off payment to Synlait in the order of $24.75 million. That payment includes amounts that had largely been withheld in accordance with the terms of the NPMSA from payment pending resolution of matters in dispute. Although Synlait is receiving a payment and pricing on certain existing products manufactured for The a2 Milk Company will increase incrementally, the wider settlement arrangements mean that, when taken as a whole, the overall profitability of the products produced for The a2 Milk Company is expected to be moderately impacted due to additional costs and adjustments to manufacturing standards. Despite this, new business opportunities exist with The a2 Milk Company, in relation to potential long term US IMF market access and the development of an additional China label product subject to US Food and Drug Administration and SAMR approval respectively.
Settlement conditional on completion of Synlait’s deleveraging plan – major shareholders indicate support
The settlement is conditional on Synlait completing an equity raise and a refinancing of its existing banking facilities. Synlait is working to finalise the terms of the equity raise and the bank refinancing. Shareholders will have the opportunity to vote on these matters at a Special Shareholders’ Meeting.
Further information will be set out in the notice of meeting, which is expected to be released this month.
Provided the settlement conditions are satisfied, the arbitration to resolve the disputes will end. In the meantime, the arbitration hearing for exclusivity and other matters has been adjourned.
The a2 Milk Company has agreed to support and subscribe to an equity raise. As previously indicated, Bright Dairy fully supports Synlait raising equity capital, subject to terms being finalised, and all necessary approvals being received.
The a2 Milk Company Settlement Deed – Key Terms
Settlement payment from The a2 Milk Company to Synlait
- A one-off settlement payment from The a2 Milk Company to Synlait in the order of $24.75 million will be made.
- The payment includes amounts that had been withheld in accordance with the terms of the NPMSA from payment pending resolution of matters in dispute.
Exclusivity disputes
- The parties have agreed that The a2 Milk Company’s cancellation of its exclusivity obligation under the NPMSA by notice on 15 September 2023 is valid but that exclusivity will not end until 1 January 2025.
- The parties have agreed that Synlait’s commitments in the NPMSA to procure the supply of a minimum annual volume of product, and certain priority arrangements in favour of The a2 Milk Company, shall continue after the end of exclusivity on 1 January 2025.
- Synlait will make available to The a2 Milk Company an additional slot at Dunsandel for a potential new China Label registered product – The a2 Milk Company and Synlait will work together to develop the new product, prepare the SAMR registration dossier and seek registration from SAMR by December 2029.
The parties have agreed that:
- The a2 Milk Company owns the intellectual property rights for the product specifications of all finished products currently manufactured under the NPMSA; and
- The a2 Milk Company is free to manufacture, and/or procure the manufacture of the products utilising the product specifications.
Pricing disputes
- The parties have agreed to resolve the various pricing disputes between them as to the application of the controllable and non-controllable costs provisions in the NPMSA.
New products dispute
- The parties have agreed that the infant milk formula products developed for the United States market are products supplied under the NPMSA, with The a2 Milk Company contributing to certain Synlait development costs and US Food Drug and Administration registration costs.
Operational matters
- The parties have agreed that, going forward, Synlait will provide The a2 Milk Company with enhanced access to Synlait’s site, people and information relevant to Synlait’s supply to The a2 Milk Company in addition to adjustments to manufacturing standards.
blackcap
16-08-2024, 12:13 PM
This makes the bonds a pretty safe bet now.
Bikeguy
16-08-2024, 12:48 PM
This makes the bonds a pretty safe bet now.
Balance was right on the money with saying he was certain they would be safe, man there has been some money made and lost on those bonds!!
blackcap
16-08-2024, 01:02 PM
Balance was right on the money with saying he was certain they would be safe, man there has been some money made and lost on those bonds!!
There certainly has. I purchased about a year ago at 17% and was never really worried (thought they had enough on the balance sheet to cover), but really was perplexed at the over 100% yields at times.
Fortune favours the brave in this instance.
silverblizzard888
16-08-2024, 01:19 PM
Good outcome for both parties and good to have A2 supporting the capital raise. Announcement for capital raise should be anytime now.
Bikeguy
16-08-2024, 01:20 PM
There certainly has. I purchased about a year ago at 17% and was never really worried (thought they had enough on the balance sheet to cover), but really was perplexed at the over 100% yields at times.
Fortune favours the brave in this instance.
Well done Blackcap, good on you for holding your nerve!!
X-men
16-08-2024, 04:37 PM
There will be a CR next week
Balance
16-08-2024, 04:55 PM
Good outcome for both parties and good to have A2 supporting the capital raise. Announcement for capital raise should be anytime now.
Final negotiations over the weekend and announcement next week.
X-men
16-08-2024, 04:58 PM
Probably 28c a share CR
X-men
17-08-2024, 09:00 AM
Lord.....to raise $90m...it needs to issue 300m shares... massive dilution to the existing shareholders....
Long..long way to recover...
blackcap
17-08-2024, 10:20 AM
Lord.....to raise $90m...it needs to issue 300m shares... massive dilution to the existing shareholders....
Long..long way to recover...
I think they are looking to raise in excess of $200m from what I heard. I could be very wrong though. Massive dilution coming.
Bikeguy
17-08-2024, 12:38 PM
With both SML and A2M both supporting the CR I will be participating, clearly SML is going to survive for another few years and without such a heavy debt load so I believe it has a fair chance of coming right…
silverblizzard888
17-08-2024, 01:06 PM
They will have to raise a minimum of $200m, potentially up to $300m due to the $180m bond payment coming up because asset sales seem difficult in this environment and if you're going to raise you might as well do it all in one go and fix it straight away than raise a little and hope things improve.
blackcap
17-08-2024, 02:08 PM
They will have to raise a minimum of $200m, potentially up to $300m due to the $180m bond payment coming up because asset sales seem difficult in this environment and if you're going to raise you might as well do it all in one go and fix it straight away than raise a little and hope things improve.
So about 4 x current market cap.
That makes it about a 5 for 1 rights issue at $0.30.
But if A2 and Bright both support and there is an underwrite, this will be a goer.
Tough on existing shareholders who will potentially have to turf in another $1.50 for every share they have.
Balance
17-08-2024, 05:21 PM
Last heavily dilutary CR was Sky TV way back in 2020.
Sp was 33c when the 2.83 :1 rights issue at 12c per share to raise $157m was announced vs market cap at the time of $144m.
Theoretical ex-rights price was 17.5c.
SP traded as low as 15c during the CR trading period.
SML's CR is going to be a biggie - call it 4:1 at 25c to raise $200m.
Ex-rights price (based upon yesterday's closing sp of 36.5c) would be 27.3c.
So expect the sp to drift below that during the rights trading period?
Newman
19-08-2024, 11:33 AM
Synlait has 218.5 m shares. If it raises $1 from each existing share to get net proceeds of approximately $200 m, this would translate to 4 new shares at $0.25 each in capital raise.
bull....
19-08-2024, 01:41 PM
OK im all in for the mighty sum of $200 today
nearly up 100% now as they said at meeting may need several 100 m in raise and as my calc's suggested on this thread that fits in with there forecast ebitda forward. anyway the higher the price goes higher the cap raising price should be.
blackcap
19-08-2024, 01:42 PM
nearly up 100% now as they said at meeting may need several 100 m in raise and as my calc's suggested on this thread that fits in with there forecast ebitda forward. anyway the higher the price goes higher the cap raising price should be.
Yep, if this upwards trajectory continues, they might be able to get away with a 3 for 1, rather than a 4 or 5 for 1.
I see my bonds are now in the money, bought them at 17%, now trading at 40% but I have a capital gain. Mathematical quirks at play.
Balance
19-08-2024, 05:43 PM
Yep, if this upwards trajectory continues, they might be able to get away with a 3 for 1, rather than a 4 or 5 for 1.
I see my bonds are now in the money, bought them at 17%, now trading at 40% but I have a capital gain. Mathematical quirks at play.
Only 4 months left to maturity for the bonds.
Actually less as bond holders can require early redemption in the event of any change in Bright’s shareholding.
What an outstanding investment the bonds were when the panicked stricken holders were dumping them at 100%+ interest rates.
There was NEVER any possibility that Synlait would be allowed to go broke. And even if it did, there was plenty of asset base to realise to pay back the bonds.
Today was one of the biggest moves in the bonds, now up at 91c. Does anyone know what came out of the A2 Milk result today that was bullish for SML?
Newman
19-08-2024, 07:57 PM
Today was one of the biggest moves in the bonds, now up at 91c. Does anyone know what came out of the A2 Milk result today that was bullish for SML?
1). The capital raise is almost certain after Synlait announced its dispute with A2M was solved; thus, bonds will be paid back. Even at 38% annual return, it is best available on the bond market.
2) A2M full-year results demonstrate its IFM business in China was solid, which totally relies on Synlait to continue.
blackcap
19-08-2024, 08:31 PM
There was NEVER any possibility that Synlait would be allowed to go broke. And even if it did, there was plenty of asset base to realise to pay back the bonds.
That was my basis for purchasing the bonds.
1). The capital raise is almost certain after Synlait announced its dispute with A2M was solved; thus, bonds will be paid back. Even at 38% annual return, it is best available on the bond market.
2) A2M full-year results demonstrate its IFM business in China was solid, which totally relies on Synlait to continue.
I'm interested in what moved the bonds today, so the first point would've already been in the price... I suppose it was your 2nd point then. To go from 0.78 to 0.91 on that news in a day seems like a lot — so was wondering if perhaps A2 said something more specific re. Synlait.
allfromacell
20-08-2024, 08:04 AM
I'm interested in what moved the bonds today, so the first point would've already been in the price... I suppose it was your 2nd point then. To go from 0.78 to 0.91 on that news in a day seems like a lot — so was wondering if perhaps A2 said something more specific re. Synlait.
I think the NZX is just a low liquidity market that is slow to react and terribly inefficient and pricing instruments. The big news was the settlement.
For retail it's a blessing, ample opportunities to take advantage of it.
Balance
20-08-2024, 08:26 AM
I think the NZX is just a low liquidity market that is slow to react and terribly inefficient and pricing instruments. The big news was the settlement.
For retail it's a blessing, ample opportunities to take advantage of it.
Yup - not often one gets to invest in bonds yielding over 100%!
billkiapi
20-08-2024, 05:53 PM
well, that announcement makes it clear Bright takes control....
Bikeguy
20-08-2024, 06:05 PM
well, that announcement makes it clear Bright takes control....
What announcement?
What announcement?
Look at nzx.com. Its all on there
Bikeguy
20-08-2024, 06:10 PM
What announcement?
Found it, cheers
winner69
20-08-2024, 06:10 PM
What announcement?
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/436510/425123.pdf
Not asking you for any cash
Am I reading this right? Bright buying shares at 60c, A2 get theirs at 43c? Maybe this is part of the dispute settlement from the other day.
bull....
20-08-2024, 06:14 PM
great news no discounted cash issue :t_up: 60c tomorrow :t_up:
Bikeguy
20-08-2024, 06:18 PM
great news no discounted cash issue :t_up: 60c tomorrow :t_up:
****, I waited so I had my powder dry for the CR
Bikeguy
20-08-2024, 06:20 PM
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/436510/425123.pdf
Not asking you for any cash
I was holding out to get some in the CR cheap… I am new to shares and have never seen a CR done this way
winner69
20-08-2024, 07:00 PM
Other shareholders other than Bright/A2 own 40% of Synlait
After the raise they'll own 15%
Take it or Synlait 'cease trading'
That's how the cookie crumbles
Not the end of their troubles I fear …more pain to come methinks
Wow how in the world is that fair for the small retail shareholder
All in all, Bright made sure they had game under control and they played very well. Gotta give it to the Chinese business operandi.
How much have bright tipped in now?
Just a pocket change of $185ml, at least they’re paying top rate at 60c a piece, A2 got bit of bargain at 43c a piece for $33ml tip.
Time and again retail holders are just nuisance in the whole game.
moimoi
20-08-2024, 07:21 PM
I was holding out to get some in the CR cheap… I am new to shares and have never seen a CR done this way
And you might not ever see it done this way again as it is undoubtably VERY VERY UNUSUAL in NZ or AUS capital markets.
A takeover has just occurred without it being transparently disclosed. This takeover, has enabled Bright to take complete control of SML without making an offer to the existing shareholder base, under the disguise of "the only viable option capital raise".
A2. the only other participant. spends a token $32M to keep its licence intact, while every other shareholder gets stiffed.
No wonder the SML Founder exited recently.
Effectively this is now a private company and should be de-listed forthwith.
IMO there is next to no reason or benefit to any shareholder other than Bright and A2M to remain involved.
GLTA.
silverblizzard888
20-08-2024, 07:22 PM
I think some shareholders will have felt hard done by since they held back capital on the side for the raise and missed buying cheaper shares earlier. They should have at least offered shareholders a chance to buy at 43 cents in a smaller raise just to let other shareholders participate, but I can understand they wanted to get things done with speed and less paperwork. Overall its a decent deal with Bright and A2 paying a premium. The deal gives Bright basically control of the company, but I wouldn't see it as entirely bad thing because now they can demand better terms from A2 in the future and not get pushed around.
SB888 you and a handful of other retail investors bought below 60cents. Most will be well underwater at 60cents. With the benefit of hindsight the sp has been manipulated down to 30cents to make 60cents look good. Bad deal.
Well done Bright. But still how much in total has Bright now put in? Must be close to $500m??
Bikeguy
20-08-2024, 07:41 PM
I guess the ship is steadied for the foreseeable? Both big shareholders are now locked in so will have no desire to see this go down so maybe the market will have a return in confidence with SML and the share price will climb back up abit?
silverblizzard888
20-08-2024, 07:48 PM
SB888 you and a handful of other retail investors bought below 60cents. Most will be well underwater at 60cents. With the benefit of hindsight the sp has been manipulated down to 30cents to make 60cents look good. Bad deal.
Well done Bright. But still how much in total has Bright now put in? Must be close to $500m??
It would have been tough for Synlait to raise $200m from the local markets given their track record, it was always going to be done at the mercy of Bright. Its not great for shareholders who paid more than 60 cent for their shareholders, but atleast now the company lives to fight another day and if they can get it back to the glory days it'll be worth 2 or 3 times its value which is better than the current situation. Bright has taken considerable risk putting this much capital on the line, after all theres no guarantee Synlait will not continue to decline after this raise as shown by their raise during covid. Management team needs straighten up and get the company running again.
clearasmud
20-08-2024, 08:19 PM
It would have been tough for Synlait to raise $200m from the local markets given their track record, it was always going to be done at the mercy of Bright. Its not great for shareholders who paid more than 60 cent for their shareholders, but atleast now the company lives to fight another day and if they can get it back to the glory days it'll be worth 2 or 3 times its value which is better than the current situation. Bright has taken considerable risk putting this much capital on the line, after all theres no guarantee Synlait will not continue to decline after this raise as shown by their raise during covid. Management team needs straighten up and get the company running again.
What's wrong with an underwritten capital raise.
We aren't stupid this way minorities are getting squeezed out.
silverblizzard888
20-08-2024, 08:22 PM
What's wrong with an underwritten capital raise.
We aren't stupid this way minorities are getting squeezed out.
Nothings wrong with an underwritten raise, I'm not sure why they didn't offer it and raise more money, the board should definitely be questioned on why they left other shareholders out, in the last meeting they said they wanted to be fair to every shareholder, so they should definitely be questioned on it. Good time for Shareholder Association to involved. Theres also an upcoming meeting when this gets voted on for shareholders to express their opinion.
moimoi
20-08-2024, 08:25 PM
I guess the ship is steadied for the foreseeable? Both big shareholders are now locked in so will have no desire to see this go down so maybe the market will have a return in confidence with SML and the share price will climb back up abit?
Neither Bright or A2 have any requirements around the pricing of the SML shareprice. Its irrelevant to them. Both have obtained what they wanted. The same empiracally can not be said of any other shareholder.
GLTA.
moimoi
20-08-2024, 08:28 PM
It would have been tough for Synlait to raise $200m from the local markets given their track record, it was always going to be done at the mercy of Bright. Its not great for shareholders who paid more than 60 cent for their shareholders, but atleast now the company lives to fight another day and if they can get it back to the glory days it'll be worth 2 or 3 times its value which is better than the current situation. Bright has taken considerable risk putting this much capital on the line, after all theres no guarantee Synlait will not continue to decline after this raise as shown by their raise during covid. Management team needs straighten up and get the company running again.
As a matter of course every existing shareholder should be given the opportunity to participate in a re-capitalisation of the company they are invested in.!!
clearasmud
20-08-2024, 08:30 PM
Nothings wrong with an underwritten raise, I'm not sure why they didn't offer it and raise more money, the board should definitely be questioned on why they left other shareholders out, in the last meeting they said they wanted to be fair to every shareholder, so they should definitely be questioned on it. Good time for Shareholder Association to involved. Theres also an upcoming meeting when this gets voted on for shareholders to express their opinion.
This capital raise should have been dressed up with the earlier loan.
It likely would have passed.
It this new proposal likely to be passed?
I think so.
I'm not overly familiar with the OIO, but does this Bright transaction not require their approval given its value and in what is an effective takeover?
silverblizzard888
20-08-2024, 08:50 PM
I'm not overly familiar with the OIO, but does this Bright transaction not require their approval given its value and in what is an effective takeover?
It seems they would require approval unless theirs an exception to this rule "if the overseas person holds an interest of more than 25% but less than 50%, consent is required for increasing its interest above 50%"
blackcap
20-08-2024, 09:07 PM
It would have been tough for Synlait to raise $200m from the local markets given their track record, it was always going to be done at the mercy of Bright. Its not great for shareholders who paid more than 60 cent for their shareholders, but atleast now the company lives to fight another day and if they can get it back to the glory days it'll be worth 2 or 3 times its value which is better than the current situation. Bright has taken considerable risk putting this much capital on the line, after all theres no guarantee Synlait will not continue to decline after this raise as shown by their raise during covid. Management team needs straighten up and get the company running again.
Retail shareholders can always buy on market at $0.60 or thereabouts, and have been able to buy bucketloads at prices a lot lower the last few months. No grumbling required by retail shareholders here.
That said, they are being squeezed out and will not have much of a future in this company. May well be a blessing in disguise. Who knows where to from here for SML.
Also that being said, bonds likely to trade at less than 10% tomorrow?
Toddy
20-08-2024, 09:51 PM
Game set and match is my prediction. I'm guessing that under the takeover code Bright will have to offer all retail investors 60 cents a share. And maybe they will have to take it. As the letter states, no deal means that they will have to cease trading.
.
And well done to those who took the risk and invested over recent months. It was a risk that has paid off.
Is $218m new capital enough? Last interim report had bank debts of $411m (being $112+$68.9+$154.3+$75.7). Add $180m for the bonds and total debts were $591m as at 31 January. $218m doesn't go nicely into $591m.....so is this enough?
With the change of control I believe bondholders can now call up their loans. $218m - $180m leaves at most $38m for other debt reduction. I thought it was the banks pushing this process.....would they agree to getting less than 20% of the funds raised? In light of various current headwinds faced by SML I doubt debts will have reduced since the HY, although A2 did recently release a large payment that had been withheld.
Lastly, shares on issue go from 218.6m to 603.2m. Looking forward to assumed revenues of say $1.7b and 3% NPAT, that gives a future EPS of 8.5c so I can't see the SP going over $1 any time soon. This 8.5c is assuming various headwinds are navigated by Management.
I don't think they have raised enough so I expect there may be more news to come. And on that note, I expect SML will "clear the decks" and write off a lot of things off in the annual report for the period ended July 2024. All other losses reported to date may pale in comparison to what is coming.
GLTAH, not advice, this is all just my opinion.
aperitif
20-08-2024, 11:47 PM
Watch them magically find a buyer for dairyworks now...
My notes post 1H
Pokeno is interesting and could be sold to a2, although they don't have the SAMR license its very plausible they could acquire Bodco(B&C facility in Hamilton) for circa $60mm as they hold the SAMR license for their Pharmalac brand into China(Stage 1-3). DB did allude to the possibility of doing a "brand swap" on the 1H call. Of note also, Bodco was previously supplied by MVM prior to a2 buying it. The founding shareholders of Bodco also founding shareholders of MVM & CAHG a Chinese SOE.
They've spent around $425mm on capex and is currently under utilized(Abbott a major customer). Discount? Market access to USA and diversification for Abbott.
bull....
21-08-2024, 06:31 AM
I was holding out to get some in the CR cheap… I am new to shares and have never seen a CR done this way
generally you need to own stock to participate in a cap raise.
Sometimes you can purchase stock at lower prices after or during a cap raise but you take the risk of missing out all together sometimes too.
it all depends on the company situation to decide which action is best to take.
bull....
21-08-2024, 06:37 AM
Nothings wrong with an underwritten raise, I'm not sure why they didn't offer it and raise more money, the board should definitely be questioned on why they left other shareholders out, in the last meeting they said they wanted to be fair to every shareholder, so they should definitely be questioned on it. Good time for Shareholder Association to involved. Theres also an upcoming meeting when this gets voted on for shareholders to express their opinion.
be interesting how s/h assoc act in this case. they should probably have a moan about them not offering a SPP
but i see in there statement they must have been told there was no appetite for new stock by big brokers and insto's
The size of the required recapitalisation is significant, with the proposed proceeds to be raised under the equity raise representing around three times Synlait’s current market capitalisation. Raising that amount of new equity capital is highly challenging in any circumstance but is particularly so for Synlait given its current over-geared financial position and recent financial underperformance.Accordingly, after taking external financial advice, the Independent Directors formed the view that the optimal offer structure for the company and its shareholders is via the placements to its two major shareholders, Bright Dairy and a2MC.
blackcap
21-08-2024, 06:45 AM
be interesting how s/h assoc act in this case. they should probably have a moan about them not offering a SPP
but i see in there statement they must have been told there was no appetite for new stock by big brokers and insto's
The size of the required recapitalisation is significant, with the proposed proceeds to be raised under the equity raise representing around three times Synlait’s current market capitalisation. Raising that amount of new equity capital is highly challenging in any circumstance but is particularly so for Synlait given its current over-geared financial position and recent financial underperformance.Accordingly, after taking external financial advice, the Independent Directors formed the view that the optimal offer structure for the company and its shareholders is via the placements to its two major shareholders, Bright Dairy and a2MC.
I actually don't have a major problem with it. It is being done at a "Premium" to the current SP. And a large one at that. In fact you can argue existing shareholders are not being diluted, in fact the opposite.
But it would have been nice to offer shares to existing shareholders at 60 cents as well.
(To be fair, how many existing shareholders would take up the rights at 60 cents? I am sure bugger all)
snigmac
21-08-2024, 07:28 AM
The raise is really confusing. On one hand, if you value the company at its current market cap, each share you hold is going to be worth less. However, if u value the company at for example 90m plus the funds that have been raised, technically there is no discount...
blackcap
21-08-2024, 07:35 AM
The raise is really confusing. On one hand, if you value the company at its current market cap, each share you hold is going to be worth less. However, if u value the company at for example 90m plus the funds that have been raised, technically there is no discount...
That may be so, but if you value the company at $90m, then you would surely have been backing up the truck the last few months.
If SML had come out and said, right we are doing a rights issue at 60 cents, and Bright will underwrite it, then realistically how many shareholders would dip into their pockets at 60 cents considering what has gone on the last year. The company is not out of the woods, even with the debt reduced as suppliers have been leaving etc. Who knows, will SML be profitable going forward?
snigmac
21-08-2024, 08:13 AM
Abit of uncertainty here, wonder how the market will react? Might see a few people who have bought recbetly taking a profit and rebuying pending what the share price is after the raise.
Bikeguy
21-08-2024, 08:16 AM
I actually don't have a major problem with it. It is being done at a "Premium" to the current SP. And a large one at that. In fact you can argue existing shareholders are not being diluted, in fact the opposite.
But it would have been nice to offer shares to existing shareholders at 60 cents as well.
(To be fair, how many existing shareholders would take up the rights at 60 cents? I am sure bugger all)
Can I ask you a question Blackcap? I’m interested in what you mean by “quite the opposite “
Can you explain what you mean as I would like to learn, thank you
Toddy
21-08-2024, 08:25 AM
Watch them magically find a buyer for dairyworks now...
My notes post 1H
Pokeno is interesting and could be sold to a2, although they don't have the SAMR license its very plausible they could acquire Bodco(B&C facility in Hamilton) for circa $60mm as they hold the SAMR license for their Pharmalac brand into China(Stage 1-3). DB did allude to the possibility of doing a "brand swap" on the 1H call. Of note also, Bodco was previously supplied by MVM prior to a2 buying it. The founding shareholders of Bodco also founding shareholders of MVM & CAHG a Chinese SOE.
They've spent around $425mm on capex and is currently under utilized(Abbott a major customer). Discount? Market access to USA and diversification for Abbott.
100 percent agree. Someone had to save this basket case. And they should be rewarded for doing so.
blackcap
21-08-2024, 08:27 AM
Can I ask you a question Blackcap? I’m interested in what you mean by “quite the opposite “
Can you explain what you mean as I would like to learn, thank you
Using the closing price of $0.40, Bright are adding in $ at $0.60.
Current market cap is $86m. Bright/A2 are adding $218m meaning new value of company is $304m
If you have say 1,000 shares right now, your "value" is $400.
Post this "recapitalisation" your $1000 shares are worth circa $506.
(384m shares plus existing 216m shares makes a total of 600 million shares, dividing new value of enterpirse of $304m by 600m gives per share valuation of $0.506)
Thus there is no dilution and as a retail shareholder you are actually better off.
Bikeguy
21-08-2024, 08:56 AM
Using the closing price of $0.40, Bright are adding in $ at $0.60.
Current market cap is $86m. Bright/A2 are adding $218m meaning new value of company is $304m
If you have say 1,000 shares right now, your "value" is $400.
Post this "recapitalisation" your $1000 shares are worth circa $506.
(384m shares plus existing 216m shares makes a total of 600 million shares, dividing new value of enterpirse of $304m by 600m gives per share valuation of $0.506)
Thus there is no dilution and as a retail shareholder you are actually better off.
Legend, many thanks Blackcap
Can someone please explain how/why A2 picked up shares at 43c, when Bright paid 60c?
Balance
21-08-2024, 09:01 AM
Can someone please explain how/why A2 picked up shares at 43c, when Bright paid 60c?
Because Bright is paying a premium for taking majority control.
winner69
21-08-2024, 09:03 AM
Can someone please explain how/why A2 picked up shares at 43c, when Bright paid 60c?
Probably to do with maintaining their 20% holding …. While keeping total $ raised to a certain amount ..and Bright control premium
Sideshow Bob
21-08-2024, 09:04 AM
I wonder if under the revised shareholder structure if A2 will have anyone on the board?
bulltrap
21-08-2024, 09:05 AM
Because Bright is paying a premium for taking majority control.
A stealth takeover premium for a stealth takeover.
Newman
21-08-2024, 09:13 AM
I wonder if under the revised shareholder structure if A2 will have anyone on the board?
A2 milk would say goodbye to Synlait within a few years.
whatsup
21-08-2024, 09:17 AM
As a matter of course every existing shareholder should be given the opportunity to participate in a re-capitalisation of the company they are invested in.!!
Before that happens if I was a share holder I would want to know what is the viability of their Pokeno plant, its not covering costs yet, its farmers are leaving in droves as they do not pay what Fonterra does and its not the greatest area of dairy farming even though they haul milk from a wide area. Farmers will always go to who ever pays the best and highest price even though they have to give 2 years to leave.
Toddy
21-08-2024, 09:22 AM
A stealth takeover premium for a stealth takeover.
Not the right words for someone 'saving' the company.
A2 will get what the need.
Retail investors are cornered. They can decide to stay cornered or alternatively save themselves the stress and get out and reinvest in a company that is not effectively privately owned.
I think it's a very positive outcome given the debt stress. It's like winning the lottery.
bulltrap
21-08-2024, 09:54 AM
I think it's a very positive outcome given the debt stress. It's like winning the lottery.
It's a small win for those who paid lottery ticket prices for the shares or bonds.
For the retail shareholders who paid a premium to NTA for a solid business, liquidation value should've been their worst-case outcome. But now they're unlikely to get that.
blackcap
21-08-2024, 10:00 AM
It's a small win for those who paid lottery ticket prices for the shares or bonds.
For the retail shareholders who paid a premium to NTA for a solid business, liquidation value should've been their worst-case outcome. But now they're unlikely to get that.
Liquidation value might have been zero.
I think any shareholder, whether you got in at $5.00 or recently at $0.25, can be happy with the recapitalization effort that has been achieved. There is now a going concern going forward.
Did shareholders, really want a 4 for 1 at $0.25? How would that have helped anyone?
bull....
21-08-2024, 10:08 AM
i had liquidation value over $2 so was a screaming buy in the 20s. anyway should move higher to 60c easliy now bright running the show
blackcap
21-08-2024, 10:29 AM
I am holding onto my purchase in the early 20's and will wait for the (inevitable?) Bright takeover at about $1.
bull....
21-08-2024, 10:34 AM
settling down at mid point of 43/60
sunnysleeper11
21-08-2024, 10:40 AM
i had liquidation value over $2 so was a screaming buy in the 20s. anyway should move higher to 60c easliy now bright running the show
im screaming I didn't buy
your valuation - is this assets minus debt (essentially)?
bull....
21-08-2024, 10:53 AM
im screaming I didn't buy
your valuation - is this assets minus debt (essentially)?
thats a basic way to do it. anyway i added in a premium for dunsendel.
of course why it might look like this on paper in reality things can turn out different , just look how they had to write down dairyworks when no buyers apperared. anyway there assets would have to have been written down rediculously to get anywhere near 20c.
still risky business as bright dairy need to turn it around so that take time and maybe more money from bright ?
Newman
21-08-2024, 03:43 PM
It seems that Synlait share price stabilized at around 46 cents. Who would complain about the capital raise placement to A2m?
aperitif
21-08-2024, 04:25 PM
a2 and Abbott will buy Pokeno circa $300-400mm. It makes too much sense, this plant was built for a2's English label ramp up originally, Bodco BC facility(SAMR under Pharmalac) will get acquired too($50-60mm), do a "brand swap" and have a second China label in the market. Auckland facility will produce new EL and have supply from MVM. You have geographic diversification, a plant they know well, and a LARGE multinational(Abbott) who is ramping Soy/Hybrid powders, has recently pulled out of the China IF market and a massive presence in USA infant.
Newman
21-08-2024, 04:56 PM
NZ Herald: China’s Bright Dairy set to take majority stake in Synlait, Pōkeno decision four to six weeks away (pay walled)
Balance
22-08-2024, 08:36 AM
NZ Herald: China’s Bright Dairy set to take majority stake in Synlait, Pōkeno decision four to six weeks away (pay walled)
Sounds like one option is to mothball Pokeno.
$300m write-off?
Changes the figures in SML's financials somewhat.
https://www.nzx.com/announcements/436600
https://businessdesk.co.nz/article/primary-sector/open-country-expected-to-pick-up-synlaits-north-island-milk-supply
Newman
22-08-2024, 09:44 AM
Sounds like one option is to mothball Pokeno.
$300m write-off?
Changes the figures in SML's financials somewhat.
https://www.nzx.com/announcements/436600
https://businessdesk.co.nz/article/primary-sector/open-country-expected-to-pick-up-synlaits-north-island-milk-supply
To mothball Pokeno would be better than continuous bleeding.
Bikeguy
22-08-2024, 10:21 AM
So it would be a good thing to mothball it?
Does anyone think they will actually sell it? Cheers
Balance
22-08-2024, 10:24 AM
To mothball Pokeno would be better than continuous bleeding.
Yup - been costing SML $3m a month to keep that plant going.
Makes you wonder why they even built the thing. The white elephant almost sunk the ship!
Balance
22-08-2024, 10:48 AM
Makes you wonder why they even built the thing. The white elephant almost sunk the ship!
Let’s be fair - Pokeno was pre-Covid.
Covid sank many a business and we saw the damage with ATM as well.
Sideshow Bob
22-08-2024, 10:51 AM
Would be fascinating to see the original business case for Pokeno and the basis for making the decision to invest.
Then I recall it was a shambles with covenants etc?
When has an acquisition or expansion worked for Synlait?? How is Talbot Cheese going these days??
Let’s be fair - Pokeno was pre-Covid.
Covid sank many a business and we saw the damage with ATM as well.
Maybe covid wasnt ideal. But the issue is they built the sucker without any firm demand for it?!? They pretty much took a big gamble...
Balance
22-08-2024, 10:55 AM
Maybe covid wasnt ideal. But the issue is they built the sucker without any firm demand for it?!? They pretty much took a big gamble...
The demand (preCovid) for A2 IF and NZ’s white gold was extremely robust. Just have to look at ATM and that gives you an idea.
Covid changed everything.
aperitif
22-08-2024, 11:10 AM
The Company’s newest dairy facility is located at Pokeno, Waikato. In addition to being able to produce infant grade dairy products, the facility is also provisioned for the production of plant-based Advanced Nutrition and other adult based nutritional products. The Company’s other North Island assets include a blending and canning facility located at a leased location close to Auckland airport and a leased warehouse facility located in Wiri. Synlait North Island has a total of approximately 270 FTE employees across its three sites operating primarily in manufacturing and warehousing roles. North Island also utilises shared services from Dunsandel including lab testing.In November 2020, Synlait announced that it had entered into a manufacturing supply agreement with a global leader in Advanced Nutrition products. While the plant was largely complete at the time,an additional ~$100 million investment for additional processing and packaging customisation was required to satisfy the customer’s requirements for plant-based products.
Synlait has invested a total of approximately $450 million in the North Island since 2018 as part of its strategy to diversify customers, products and geography. While this expansion was at the time supported by strong commercial rationale based on expected growth in demand levels for Advanced Nutrition products (including potential a2MC demand), the Covid-19 disruptions and changing economic circumstances have subsequently resulted in a considerable change in outlook.
Some performance issues and customer demand levels lagging well below expectations have meant that plant utilisation has been extremely low. Consequently, Synlait’s North Island assets have performed poorly and are expected to generate meaningful losses and negative cash flows over the medium term (estimated >$20m EBITDA loss contribution in FY24).
Divestment: Either sell the North Island assets on an as-is basis to potential buyers with an interest in Advanced Nutrition or shut down the plant and realise the value of land and buildings as well as plant and equipment on a salvage value basis.
− Mothball the plant: We understand that Synlait considered a scenario where the plant is mothballed and then potentially recommissioned as a nutritional ingredients plant upon securing a level of demand which would ensure a sufficient level of capacity utilisation. This alternative is no longer being pursued
Pretty clear this thing will get sold to below replacement value. a2 $900mm going to come in handy here
Newman
22-08-2024, 11:29 AM
Aperitif: where does the divestment/mothball information come from?
Baa_Baa
22-08-2024, 11:54 AM
Aperitif: where does the divestment/mothball information come from?
https://www.synlait.com/wp-content/uploads/2024/08/SML-Independent-Advisers-Report-20-August-2024-FINAL.pdf
Balance
22-08-2024, 12:09 PM
https://www.synlait.com/wp-content/uploads/2024/08/SML-Independent-Advisers-Report-20-August-2024-FINAL.pdf
Thanks, Baa_Baa.
Begs the question then what the plant would be used for if the milk supply is sold to Open Country Dairy?
aperitif
22-08-2024, 04:56 PM
More Notes:
Pro forma capital raise $310mm Debt
a2 and abbott buy to form a JV $300-400mm, Synlait debt free and shareholders happy.
Milk supply not an issue and advanced nutrition facility (have MVM supply) less favorable conditions in NI, fonterra also...
Purchase Bodco B&C facility circa $40-50mm with (SAMR license under Pharmalac brand) and do brand swap, close association with MVM(circa 5% stake)
Abbott - a2 have indirect product diversification through Abbotts plant based initiatives and the Pediasure brand which is ironically the same color(purple) and have massive ambition also in adult nutrition. NZ FTA agreement handy here. Not to mention the USA opportunity for IF and higher margin products. Im sure they must have been interested last year when Synlait were "exploring options", makes you think if Bortolussi has had a "chat" to Abbott's team...Pulled out of China IF market 2023, strategic stake in a2? Exploring M&A -chat in their previous call, cashed up.
bull....
23-08-2024, 06:59 AM
More Notes:
Pro forma capital raise $310mm Debt
a2 and abbott buy to form a JV $300-400mm, Synlait debt free and shareholders happy.
Milk supply not an issue and advanced nutrition facility (have MVM supply) less favorable conditions in NI, fonterra also...
Purchase Bodco B&C facility circa $40-50mm with (SAMR license under Pharmalac brand) and do brand swap, close association with MVM(circa 5% stake)
Abbott - a2 have indirect product diversification through Abbotts plant based initiatives and the Pediasure brand which is ironically the same color(purple) and have massive ambition also in adult nutrition. NZ FTA agreement handy here. Not to mention the USA opportunity for IF and higher margin products. Im sure they must have been interested last year when Synlait were "exploring options", makes you think if Bortolussi has had a "chat" to Abbott's team...Pulled out of China IF market 2023, strategic stake in a2? Exploring M&A -chat in their previous call, cashed up.
makes sense what you saying in regard to pokeno. how about joint ownership by a2 and synliat ?
Bikeguy
23-08-2024, 08:51 AM
makes sense what you saying in regard to pokeno. how about joint ownership by a2 and synliat ?
That seems a better fit?
Balance
23-08-2024, 08:58 AM
That seems a better fit?
Effectively already joint ownership post CR with the two owning 85%.
Bikeguy
23-08-2024, 09:00 AM
Effectively already joint ownership post CR with the two owning 85%.
Fair point😅
Newman
23-08-2024, 10:29 AM
Effectively already joint ownership post CR with the two owning 85%.
Would selling Pokeno to a buyer other than A2 Milk require the approval of 75% of shareholders? With 20% shareholding, A2 Milk could effectively restrict what Synlait could do.
Newman
23-08-2024, 03:33 PM
In his Taking Stock newsletter, Chris Lee wrote:
THE Bright Dairy/ATM proposed solution for Synlait Milk recognises that Synlait’s assets and business model have real value, well in excess of debt.
It recognises that Bright and a2 Milk are the relevant long-term beneficiaries of the business model and that Synlait’s survival must be underwritten by the two beneficiaries. The solution ensures the bond holders are repaid, and must be repaid prematurely, if the proposed solution wins shareholder voting support.
And the solution provides the motivation for all shareholders to regard Synlait in the future as being the equivalent of a private company, run for the benefit of the major shareholders.
My plan, were I an owner of SML securities, would be:
To request bond repayment when available from 1-15 October.
To sell immediately my shares at whatever price I could get.
If the proposed restructure means survival, it would mean farmers would retain access to pricing tension when selling their milk production, Fonterra an obvious choice.
And it would mean Synlait’s nett revenue could be split up by Bright and a2 Milk, possibly with a structure that suits Bright and China, as well as a2 Milk.
The prospect of the nett surplus being created to share amongst thousands of external shareholders would seem to me to be unlikely.
I am in total disagreement with the NZ Shareholders Association. I know no retail investor who would want to participate in a rights issue in the hope of being treated equally in the future.
Sell, and start again, would seem a logical step.
bulltrap
23-08-2024, 05:00 PM
In his Taking Stock newsletter, Chris Lee wrote:
...
I am in total disagreement with the NZ Shareholders Association. I know no retail investor who would want to participate in a rights issue in the hope of being treated equally in the future.
Huh.
Would those retail investors be somehow worse off, if given the choice to participate in the CR, chose not to?
What about if holders were issued tradable rights, as was once common?
IMHO, there's a worrying precedent being set here, where minority shareholders (e.g., a2 and Bright) can collude to effectively take over a company, by issuing themselves equity at a deeply discounted price, and without compensating remaining holders a cent - and somehow everyone is OK with that.
GLTAH, of this and every other listed company. :mad ;:
Balance
23-08-2024, 05:16 PM
Huh.
Would those retail investors be somehow worse off, if given the choice to participate in the CR, chose not to?
What about if holders were issued tradable rights, as was once common?
IMHO, there's a worrying precedent being set here, where minority shareholders (e.g., a2 and Bright) can collude to effectively take over a company, by issuing themselves equity at a deeply discounted price, and without compensating remaining holders a cent - and somehow everyone is OK with that.
GLTAH, of this and every other listed company. :mad ;:
Nothing to stop retail or any investors buying shares on market now at lower than 60 cents or 43 cents.
So how many are lining up to participate by buying at lower than the CR price?
Bikeguy
23-08-2024, 05:22 PM
It’s no different to any company, once the debt has been lowered and if it can turn the corner and start making decent money the shareholders are all the same, whether it’s Bright , A2 or an institution or retail surely?
If the company makes money the value of the shares rise, regardless of who owns them?
Nothing to stop retail or any investors buying shares on market now at lower than 60 cents or 43 cents.
So how many are lining up to participate by buying at lower than the CR price?
Not really a fair question. The shares are virtually worthless in the hands of retail investors once bright and a2m have secured 85% shareholding. Blind Freddy coukd see that the company will henceforth be run entirely for the benefit of those two. It would be a quite different picture if they allowed prorate participation in a cap raise and maintained their minority, albeit, large shareholding.
This proposed arrangement shouldn't be allowed imo, but will probably succeed on the wild west nzx. I'm out with a loss and some bitter experience pills.
Bikeguy
23-08-2024, 05:29 PM
Not really a fair question. The shares are virtually worthless in the hands of retail investors once bright and a2m have secured 85% shareholding. Blind Freddy coukd see that the company will henceforth be run entirely for the benefit of those two. It would be a quite different picture if they allowed prorate participation in a cap raise and maintained their minority, albeit, large shareholding.
This proposed arrangement shouldn't be allowed imo, but will probably succeed on the wild west nzx. I'm out with a loss and some bitter experience pills.
I don’t really understand why they would be worthless? Didn’t they already have 65 percent of the company? 40/20…they were already effectively doing the above, running it for themselves prior anyway?
I don’t really understand why they would be worthless? Didn’t they already have 65 percent of the company? 40/20…they were already effectively doing the above, running it for themselves prior anyway?
Actually you are probably right, the shares were probably always worthless in the hands of retail investors. Although formerly. there was at least a pretence of a2m and bright acting in the interests of all shareholders.
It is more than clear now that this was never the case.
Bikeguy
23-08-2024, 05:46 PM
Actually you are probably right, the shares were probably always worthless in the hands of retail investors. Although formerly. there was at least a pretence of a2m and bright acting in the interests of all shareholders.
It is more than clear now that this was never the case.
Yes, the end game for Bright is very clear now,
A2 have never really had much choice in it either I feel, let’s admit it with the SAMR tickets being issued by Bright it’s not in anyone’s interest to go to war with them…
I feel that the other fact that is now on the table is Bright is not going anywhere, and they have sunk in enough now to show they are very very serious about Synlait, so I personally might just hold and see…at the end of the day if they had wanted to they could have let it fall and then picked it all up? If they start banking some money the share price will rise…
Yes, the end game for Bright is very clear now,
A2 have never really had much choice in it either I feel, let’s admit it with the SAMR tickets being issued by Bright it’s not in anyone’s interest to go to war with them…
I feel that the other fact that is now on the table is Bright is not going anywhere, and they have sunk in enough now to show they are very very serious about Synlait, so I personally might just hold and see…at the end of the day if they had wanted to they could have let it fall and then picked it all up? If they start banking some money the share price will rise…
That's certainly one way to play it - personally I dont think bright and a2m intend to leave anything on the table for you, they will just squeeze this lemon dry for their own benefit.
The tragedy is that they have been allowed to get away with it. Minority shareholders should have forced their hand by declining the 130m loan and forced a receivership( although I think bright might have come up with a plan b if thus had happened)
Good luck though
blackcap
23-08-2024, 05:56 PM
I don’t really understand why they would be worthless? Didn’t they already have 65 percent of the company? 40/20…they were already effectively doing the above, running it for themselves prior anyway?
Correct. They already had full control of the company. Having more control changes nothing really. If listed they will still have to have independent directors, audit etc. There are minority protections embedded in the companies Act.
Likely they will look to mop up the 15% minorities at some stage.
There are also risks to Bright, that if they do have 100% control, if CCCP sentiment turns sour, they could be out of a business as farmers turn to Fonterra.
Bikeguy
23-08-2024, 05:56 PM
That's certainly one way to play it - personally I dont think bright and a2m intend to leave anything on the table for you, they will just squeeze this lemon dry for their own benefit.
The tragedy is that they have been allowed to get away with it. Minority shareholders should have forced their hand by declining the 130m loan and forced a receivership( although I think bright might have come up with a plan b if thus had happened)
Good luck though
I do feel your pain though mate, I need a couple of extensions on my snorkel I’m that far underwater on this one👊
Bikeguy
23-08-2024, 06:09 PM
What are your thoughts Balance? You had the bonds 100% accurate so can I ask what you think regarding what’s happening and your thoughts on if it will go through, and is it good, bad. otherwise? Cheers mate
aperitif
23-08-2024, 06:26 PM
Another possibility I hadn't considered is and asset swap MVM for Pokeno, obviously a2 will want to keep a strategic stake, circa 15%
a2 will get Pokeno(with Abbott) and continued to be supplied by MVM. BD and CAHG(25% owner of MVM) have very close ties.
Balance
23-08-2024, 06:34 PM
Not really a fair question. The shares are virtually worthless in the hands of retail investors once bright and a2m have secured 85% shareholding. Blind Freddy coukd see that the company will henceforth be run entirely for the benefit of those two. It would be a quite different picture if they allowed prorate participation in a cap raise and maintained their minority, albeit, large shareholding.
This proposed arrangement shouldn't be allowed imo, but will probably succeed on the wild west nzx. I'm out with a loss and some bitter experience pills.
Fair comment poet.
Realistically however, how many retail investors would have been willing to shell out more money for a 2:1 rights issue at 60c per share to raise $200m+?
I understand from my banking source that the company could not get any institution/broker interested in underwriting a CR.
The only salvation for the company was always going to be Bright.
Fair comment poet.
Realistically however, how many retail investors would have been willing to shell out 60c for a 2:1 rights issue to raise $200m+?
I understand from my banking source that the company could not get any institution/broker interested in underwriting a CR.
The only salvation for the company was always going to be Bright.
I would have participated if offered the chance.
As far as underwrite is concerned, bright and a2m could have done that surely? Why did they need an external underwriter when they have shown themselves to be willing to buy all of the new shares on issue?
Them using that as an excuse is just another example of their perfidy, as is the claim that they had to act urgently (they have had plenty of time to organize an orderly cr but have chosen to run it to the wire so as to be able to claim aforesaid urgency
Balance
23-08-2024, 06:50 PM
What are your thoughts Balance? You had the bonds 100% accurate so can I ask what you think regarding what’s happening and your thoughts on if it will go through, and is it good, bad. otherwise? Cheers mate
As posted on the other site:
I personally think Synlait will prosper (just like Westland) after Bright takes control.
But I do not believe minorities will get to enjoy the upside. Like any multinational entities, plenty of scope for transfer pricing to channel the profits to wherever the owners feel are most appropriate!
Look at RBD!
As posted on the other site:
I personally think Synlait will prosper (just like Westland) after Bright takes control.
But I do not believe minorities will get to enjoy the upside. Like any multinational entities, plenty of scope for transfer pricing to channel the profits to wherever the owners feel are most appropriate!
Look at RBD!
How is RBD transferring profits to their large shareholder?
Balance
24-08-2024, 09:20 AM
How is RBD transferring profits to their large shareholder?
Transfer pricing for ingredients, management services, consultancy fees etc etc.
Seen it all before with multinationals.
Bikeguy
24-08-2024, 09:38 AM
I guess one has to hope Bright will play it and fair as possible, they have what they want, ( the assets ) under control, another piece in the puzzle for the security of their national food program…I do think as some have noted that it actually isn’t in their interests to poison the well so to speak, they tend to like to go under the rader, so hoping they will go on to make as much money as they can, for all shareholders and farmers etc,
Balance
24-08-2024, 10:11 AM
I guess one has to hope Bright will play it and fair as possible, they have what they want, ( the assets ) under control, another piece in the puzzle for the security of their national food program…I do think as some have noted that it actually isn’t in their interests to poison the well so to speak, they tend to like to go under the rader, so hoping they will go on to make as much money as they can, for all shareholders and farmers etc,
SML will be a good corporate citizen - that's for sure.
I would not be investing in any company myself however where minorities are less than 30%. Minority protection is an important consideration.
Great for investing in bonds however!!!!!!!!! Especially when panicked-stricken holders were offering them at 100%+ yield to maturity! :t_up:
billkiapi
24-08-2024, 11:08 AM
Did this all start when then founder picked a fight with A2M?
Balance
24-08-2024, 11:11 AM
Did this all start when then founder picked a fight with A2M?
All started with Covid.
Sideshow Bob
26-08-2024, 09:17 AM
https://businessdesk.co.nz/article/primary-sector/pamu-issues-cease-notice-to-synlait-milk-for-its-north-island-farms?utm_source=Digest&utm_medium=email
(Probably paywalled)
Pamu keeping their options open.
Oliver Mander
26-08-2024, 09:19 AM
NZSA article.
Retail shareholders swallowing dead rats at Synlait - New Zealand Shareholders' Association (nzshareholders.co.nz) (https://www.nzshareholders.co.nz/scrip-article/retail-shareholders-swallowing-dead-rats-at-synlait/)
bulltrap
26-08-2024, 11:27 AM
NZSA article.
Retail shareholders swallowing dead rats at Synlait - New Zealand Shareholders' Association (nzshareholders.co.nz) (https://www.nzshareholders.co.nz/scrip-article/retail-shareholders-swallowing-dead-rats-at-synlait/)
Thanks Oliver - I was concerned that the NZSA (along with the media) was taking a weak stance on SML's small/retail shareholder rights, and this article helps keep the record straight.
A couple of Q's from myself:
From a concern I raised on 'the other site' recently, Bright already refers to Synlait as its subsidiary, but I find nothing elsewhere to support that claim. What's your/NZSA view on this? If it's a subsidiary, the Bright-appointed directors could have had a legal basis under the Companies Act, for acting in Bright's interests to the detriment of Synlait and its other shareholders.
You mention a list of listed companies with concerns over 30%+ 'controlling' shareholders. Is this list available online somewhere?
I'm not an SML holder, but I'll reconsider any holdings I have that are at risk of ending up similarly pickled.
Oliver Mander
26-08-2024, 11:48 AM
Thanks Oliver - I was concerned that the NZSA (along with the media) was taking a weak stance on SML's small/retail shareholder rights, and this article helps keep the record straight.
A couple of Q's from myself:
From a concern I raised on 'the other site' recently, Bright already refers to Synlait as its subsidiary, but I find nothing elsewhere to support that claim. What's your/NZSA view on this? If it's a subsidiary, the Bright-appointed directors could have had a legal basis under the Companies Act, for acting in Bright's interests to the detriment of Synlait and its other shareholders.
You mention a list of listed companies with concerns over 30%+ 'controlling' shareholders. Is this list available online somewhere?
I'm not an SML holder, but I'll reconsider any holdings I have that are at risk of ending up similarly pickled.
Thanks bulltrap - we're always working hard, but some issues take more time to pick apart than others. Including this one.
Shareholding list: Useful Data - New Zealand Shareholders' Association (nzshareholders.co.nz) (https://www.nzshareholders.co.nz/useful-data/). Broadly up to date!
Bright / subsidiary relationship: SML's constitution allows Bright to appoint 50% of the directors. That allows them to claim SML as a subsidiary, despite a (current) <50% shareholding. I'm aware of the Companies Act provision you're referring to (s. 131.3). While SML's constitution allows 50% directors, I don't think there is any "express provision" as required by the Act to allow them to make decisions in Bright's interest.
bulltrap
26-08-2024, 02:42 PM
Thanks bulltrap - we're always working hard, but some issues take more time to pick apart than others. Including this one.
Shareholding list: Useful Data - New Zealand Shareholders' Association (nzshareholders.co.nz) (https://www.nzshareholders.co.nz/useful-data/). Broadly up to date!
Bright / subsidiary relationship: SML's constitution allows Bright to appoint 50% of the directors. That allows them to claim SML as a subsidiary, despite a (current) <50% shareholding. I'm aware of the Companies Act provision you're referring to (s. 131.3). While SML's constitution allows 50% directors, I don't think there is any "express provision" as required by the Act to allow them to make decisions in Bright's interest.
Thanks Oliver, it's good to be able to confirm that Bright has long been Synlait's parent holding company. Anyone could be forgiven for having supposed otherwise.
Checking that list, with hindsight for SML, having a board stacked with non-independent directors could be seen as a potential red flag. The '(NS)' designation is also a caution to look up what NZX waivers apply, before considering investing.
From a glance, WIN (also not holding) also stands out as having few independent directors: 5 to 2, same as SML. As always, DYOR.
Checking Synlait's constitution (https://www.synlait.com/wp-content/uploads/2019/10/Constitution-2018.pdf), I agree that nothing seems to expressly say the directors can act in Bright's interest rather than Synlait's. That said, article 26.2 (c) on 'Personal involvement of Directors' is broadly-worded enough to give lawyers something to chew over - if it ever came to a legal challenge.
I also had it a bit wrong with the Companies Act section 131.3 - on a re-read it only precludes directors not acting in the company's (here, Synlait's) interests. It doesn't explicitly protect remaining shareholders, regardless of whether the subsidiary or joint venture cases apply. Only a few provisions of the act explicitly mention 'remaining shareholders' as being of concern.
Shareholders of course do get to vote on the placement, but by my reckoning only 26% of 'remaining' (here, non-A2/Bright) shareholders would need to support it, for it all to pass. Hardly seems fair.
Sideshow Bob
28-08-2024, 10:03 AM
https://www.nzx.com/announcements/436976
Synlait receives notice of complaint
Synlait Milk Limited (Synlait) advises that it has received a notice of complaint sent on behalf of Dr John Penno regarding the special shareholders' meeting to be held on 18th September 2024. The notice states that complaints have been made to NZ RegCo and the Takeovers Panel.
The notice of complaint asserts that under the NZX Listing Rules and Takeovers Code, Bright and a2MC should not be able to vote on resolutions relating to the recapitalisation, leaving only shareholders other than Bright and a2MC being able to vote on the two resolutions.
Synlait disagrees with the complaint and considers that the NZX Listing Rules and Takeovers Code have been complied with. Synlait intends to engage with the regulators in order to have the complaint dismissed before the special shareholders’ meeting.
Synlait’s notice of meeting was issued on 20 August following external advice and approval by the regulators. It asks shareholders to approve the following resolutions relating to the proposed recapitalisation:
(a) the issuance of $185 million of shares to Bright Dairy Holding Limited (Bright); and
(b) the issuance of $32.8 million of shares to The a2 Milk Company (a2MC) and the settlement with a2MC and A2 Infant Nutrition Limited referred to in the notice of meeting.
The special shareholders’ meeting is a critical step for the future of the company. If the resolutions are not approved and the recapitalisation is not implemented, Synlait would likely need to cease trading and initiate a formal insolvency process unless it were to become clear that further support would be forthcoming from Synlait’s existing banks. Synlait notes that such support from the banks will be hard to secure in such circumstances.
Independent chair George Adams commented: “Since I joined Synlait in May this year, the Board has followed a rigorous process. The Independent Directors remain confident that this is the optimal offer structure for the company.”
At this stage, the complaint has no effect on the resolutions to be voted on at the special shareholders’ meeting nor the timing of the special shareholders’ meeting, which will proceed as scheduled. The support of all shareholders is essential to safeguard the future of the company. Shareholders can vote in person at the meeting or lodge their proxy appointment online at www.investorvote.co.nz.
Dr Penno is a 2.3% shareholder, having previously served as the CEO, the non-independent Chair, and as a director of the company until May 2024.
Synlait will provide any further updates to the market to the extent required in accordance with its continuous disclosure obligations.
bulltrap
28-08-2024, 10:46 AM
https://www.nzx.com/announcements/436976
Synlait receives notice of complaint
...
The notice of complaint asserts that under the NZX Listing Rules and Takeovers Code, Bright and a2MC should not be able to vote on resolutions relating to the recapitalisation, leaving only shareholders other than Bright and a2MC being able to vote on the two resolutions.
Like I said, hardly seems fair.
Just to illustrate how slippery this slope is, let's suppose A2 already had a 31% holding rather than 19.8%. Despite being only a quantitive difference, that would give the A2/Bright tag team enough shareholder votes to completely steamroll all other holders in any vote.
If it were framed as a joint venture, this would surely not be allowed. And it does look a lot like a joint venture from where I'm sitting.
its cool how you can buy shares now for less than what A2 and Bright are having to buy shares at. Must be a good deal for the retail shareholders after all
blackcap
28-08-2024, 11:33 AM
its cool how you can buy shares now for less than what A2 and Bright are having to buy shares at. Must be a good deal for the retail shareholders after all
It actually is a good deal for retail shareholders. There are 2 sides to every story. If you ignore sunk costs (as you should), Bright and A2 have done smaller shareholders a service.
There is no guarantee of future benefits and uplift. Shareholders complaining that they cannot get in on a 4 for 1 issue at 25 cents need their heads read.
billkiapi
28-08-2024, 11:49 AM
Wow- founder Peno, ousted from the board and sued by some related company, now has the gall to complain about the recap process
billkiapi
28-08-2024, 11:50 AM
this sums it up really https://www.nbr.co.nz/investment/penno-actions-regrettable-and-unacceptable-says-a2-letter/
silverblizzard888
28-08-2024, 01:45 PM
In some sense I agree with Penno that those who are too close to the deal need to abstain from the vote or else its not really a fair vote, let the minority shareholder who aren't involved have the say on this after all it does alter the whole foundation of the company ownership structure. Just as Bright couldn't vote in the Bright loan, maybe same rules should apply here.
blackcap
28-08-2024, 02:53 PM
In some sense I agree with Penno that those who are too close to the deal need to abstain from the vote or else its not really a fair vote, let the minority shareholder who aren't involved have the say on this after all it does alter the whole foundation of the company ownership structure. Just as Bright couldn't vote in the Bright loan, maybe same rules should apply here.
That's fine, put yourself in the position of the Chair. Let minorities vote for Christmas like turkeys and have the company liquidated?
At the end of the day, the deal that has been cobbled together, although not what minority shareholders may have wished for, is putting more money in their pockets. They should not be grumbling. Control ironically was given away quite a while ago, by providing Bright with the 50% board control. Who did that?
That's fine, put yourself in the position of the Chair. Let minorities vote for Christmas like turkeys and have the company liquidated?
At the end of the day, the deal that has been cobbled together, although not what minority shareholders may have wished for, is putting more money in their pockets. They should not be grumbling. Control ironically was given away quite a while ago, by providing Bright with the 50% board control. Who did that?
IMO, absolutely the minority shareholders should vote to put the company into liquidation. That way we will find out exactly how valuable the stainless steel is and who is willing to pay how much for it. The current arrangements aren't leading anywhere good for the minorities.
although if push came to shove, I don't think the two major shareholders would let that happen, they will have a plan B.
Bikeguy
28-08-2024, 04:03 PM
How does it help us if SML is liquidated? By the time you pay all the loans and debts (500m +) there would not be that much left split between all the current shareholders surely?
How does it help us if SML is liquidated? By the time you pay all the loans and debts (500m +) there would not be that much left split between all the current shareholders surely?
I don't think it would come to that if the minorities forced their hands.
Blazing Saddles - Nobody move or ... (youtube.com) (https://www.youtube.com/watch?v=Z_JOGmXpe5I)
blackcap
28-08-2024, 06:59 PM
How does it help us if SML is liquidated? By the time you pay all the loans and debts (500m +) there would not be that much left split between all the current shareholders surely?
Exactly, the market was pricing the bonds on the assumption that liquidation value was possibly enough to pay back the debt, but possibly not either. Either way, shareholders may have been left with little or nothing.
Newman
28-08-2024, 08:37 PM
Wow- founder Peno, ousted from the board and sued by some related company, now has the gall to complain about the recap process
Every shareholder, except for Dr Peno, could complain about the management of Synlait. He was largely responsible for the current situation of Synlait.
moimoi
28-08-2024, 08:56 PM
Liquidate it and watch the 2 largest shareholders crap themselves and bid to recover their sunk cost position / or licence position in the face of offshore and / or local competition who comprehend that you couldn't construct Pokeno or Dunsandel now for anywhere near what SML paid to build them.
Every shareholder bar the top 2 are being stiffed under a promoted narrative that the company is a basket case without the support of those two..one of whom, imo, has knowingly and actively embarked on a process to destroy SML's value.
The evidence for this statement is find any NZX market announcement in the last 30 years where the 2nd largest shareholder has advised 3 days out from a important vote affecting a companies future that they were effectively "undecided".
F off..never ever been done before in the entire history of the NZX other than in this instance.
Over the past 30 years of the NZX there are countless examples of where bidders (usually offshore) have scooped up and de-listed "undervalued" NZ companies. Too many to mention.
Rakon, as an example, not long ago was trading @ 60 cents a share when a very educated, off shore buyer, operating in a similar market segment, lobbed an ultimately unsuccessful bid of $1.70.
NZX often times isn't necessarily a good valuation measurement stick.
IMO
GLTA.
Balance
29-08-2024, 01:50 PM
https://www.farmersweekly.co.nz/news/penno-sees-better-options-for-synlait/
Marilyn Munroe
29-08-2024, 02:21 PM
https://www.farmersweekly.co.nz/news/penno-sees-better-options-for-synlait/
In Balances link there is the following quote from Synlait Chair George Adams;
"The report by Northington Partners has independently come to the same conclusion. It has also carefully appraised the insolvency option concluding that it would deliver ‘highly uncertain outcomes’ for shareholders."
Remember Northington Partners? They were the one who did the valuation for minority shareholders during the compulsory takeover of Lyttelton Port Company using a simple method of valuation. They failed to take a sideways glance at the market valuation of another listed New Zealand port company or recent on market transactions and off market sales for ports and terminals in Australia.
Boop boop de do
Marilyn
Balance
29-08-2024, 02:42 PM
In Balances link there is the following quote from Synlait Chair George Adams;
"The report by Northington Partners has independently come to the same conclusion. It has also carefully appraised the insolvency option concluding that it would deliver ‘highly uncertain outcomes’ for shareholders."
Remember Northington Partners? They were the one who did the valuation for minority shareholders during the compulsory takeover of Lyttelton Port Company using a simple method of valuation. They failed to take a sideways glance at the market valuation of another listed New Zealand port company or recent on market transactions and off market sales for ports and terminals in Australia.
Boop boop de do
Marilyn
Yet to see an independent report not supporting directors’ proposal & recommendation.
Someone said charitably that the report is part of the negotiation process.
Newman
29-08-2024, 03:20 PM
https://www.farmersweekly.co.nz/news/penno-sees-better-options-for-synlait/
Peno is successful in making boldholders anxious to sell. He is gambling that A2 milk or Bright Dairy would compete for assists and thus pushing up price. What if A2 milk does not take part in the bidding? Anyway, the administrator I of Synlait has to continuously supply IFM to A2 Milk anyway for the next 3 years!
Balance
29-08-2024, 09:38 PM
Peno is successful in making boldholders anxious to sell. He is gambling that A2 milk or Bright Dairy would compete for assists and thus pushing up price. What if A2 milk does not take part in the bidding? Anyway, the administrator I of Synlait has to continuously supply IFM to A2 Milk anyway for the next 3 years!
Realistically, only ATM and Bright would bid for Dunsandel (how about a real JV bidder) so where's the competitive tension?
Can't blame John Penno for trying though as he has seen his 'perceived/potential' wealth of 5.1m SML shares decrease from over $60m at its peak to being worth less than $2m today! Remember that John was in charge of SML when the go ahead for Pokeno was made and he was also a director until this year.
Bikeguy
30-08-2024, 06:52 AM
Realistically, only ATM and Bright would bid for Dunsandel (how about a real JV bidder) so where's the competitive tension?
Can't blame John Penno for trying though as he has seen his 'perceived/potential' wealth of 5.1m SML shares decrease from over $60m at its peak to being worth less than $2m today! Remember that John was in charge of SML when the go ahead for Pokeno was made and he was also a director until this year.
Yes, what you are saying makes sense, in fairness anyone doing business in China is not going to pick these up in the face of Bright? The reality is you would be buying a poison chalice, at some stage you would find your” production facility being inspected and failed or your SAMR being pulled for some reason…it just wouldn’t be a smart move, so like above where does this bidding war for these assets come from?
At some stage(hopefully) they will get this turned around, Bright is certainly showing it’s in it for the long haul and can’t imagine them wanting to burn money forever, do it will turn around and make money, and then they will probably buy everyone out, hopefully it’s at a good figure, I don’t see anything wrong with that, especially when we can currently get in at under 40 cents…
Balance
03-09-2024, 09:22 AM
Well worth listening to.
Decision from Takeover Panel & NZX sometime this week, it sounds like.
https://www.rexonline.co.nz/home/rural/2024/08/synait-chair-on-600m-debt-recapitalisation-efforts-john-pennos-objection.html
George Adams, Chair of Synlait, delves into the Canterbury milk processor's financial woes and ambitious plans to tackle a staggering $600 million debt.
He outlines a bold recapitalisation strategy involving major shareholders Bright Dairy and the A2 Milk Company, aimed at raising over $218 million to alleviate debt.
Adams admits past investments in the Pokeno facility and acquisitions like Talbot Cheese haven’t yielded expected returns, leading to this precarious situation.
Adams also shares his thoughts on former CEO and Chair John Penno throwing a spanner in the works, arguing that shareholders should not vote on each other's placements.
blackcap
03-09-2024, 09:43 AM
Well worth listening to.
Decision from Takeover Panel & NZX sometime this week, it sounds like.
https://www.rexonline.co.nz/home/rural/2024/08/synait-chair-on-600m-debt-recapitalisation-efforts-john-pennos-objection.html
George Adams, Chair of Synlait, delves into the Canterbury milk processor's financial woes and ambitious plans to tackle a staggering $600 million debt.
He outlines a bold recapitalisation strategy involving major shareholders Bright Dairy and the A2 Milk Company, aimed at raising over $218 million to alleviate debt.
Adams admits past investments in the Pokeno facility and acquisitions like Talbot Cheese haven’t yielded expected returns, leading to this precarious situation.
Adams also shares his thoughts on former CEO and Chair John Penno throwing a spanner in the works, arguing that shareholders should not vote on each other's placements.
Thanks Balance. Good to get George's perspective on things.
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