It would be great if there was, remember when they were a great partnership, was great for both…
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They did well for years, I think Synlait lost sight of that and stated to throw their weight around with A2M. Bond interest payment due tomorrow, I do hope they have that sorted otherwise this will collapse spectacularly
new lows coming :scared: RIP
or did they pay it from bright's loan ?
I have narrowed it down to two scenarios in my head regarding SML,
That Bright want to take it over completely as cheap as they can, forcing A2 out.
That Bright want to take it over completely with A2 as a partner, as cheaply as they can.
Thoughts anyone?
My layman's guess is ultimately a partnership between Bright and A2, with Bright upping its stake to over 50% and A2 picking up the rest. Maybe similar to the 51%-49% partnership with Synlait's former parent company, prior to listing.
For Bright, the political optics of having a local partner are good, and they can keep calling Synlait their subsidiary. A2 needs to stay involved, and has deep pockets to help with recapitalisation.
I’m in two minds about A2, you could be right about the selling out, but do they really have much of a choice if that’s true? I think there is a real possibility that they are trying really hard to get the best outcome for the shareholders (of which they are a big one) as possible…I feel they could be working hard behind the curtain but cannot really discuss the situation, hence why they have just really said nothing publicly about what is going on…
Bang on, this will be truly transformational for a2 with BD's large distribution network. Would not be surprised to see them build a stake in a2 over time...
Well said, It really would be transformational to the futures of both of these companies wouldn’t it,
Bright and A2 are seriously impressive companies in their own right…and when combined complete a exceptional product to market relationship that delivers value in every area, from the quality of the product through to the food security desires of China, and was making all involved some serious coin.
No one is going to be throwing that away, neither Bright nor A2, sure A2 can go to another manufacturer but we all know it’s not actually that easy and gives them no where near the access to market security Bright does, and China loves and wants the quality and security of the A2 product.
These two companies combined make an extremely profitable value proposition, do not kid yourselves in any way they both don’t know this.
I feel this company is going to be taken over by Bright, most probably in a JV with A2, at an offer somewhere between 1.80 - 2.20 (NZ) and it will be fantastic news for A2, production security, market access, profit sharing with their own supplier…all this agro between these two is just negotiating, smoke and mirrors while they sort the final ownership structure and future profit split
Yes, they have the existing China State Farm agreement which has been and continues to be incredibly important. Forming an alliance/JV would put a2 in an incredibly strong position both from a manufacturing/distribution/market access standpoint, but also remove the "China rhetoric" somewhat. Having two state owned entities along for the ride;no tariffs and recent news on the "IF co operation agreement" to essentially share expertise, knowledge/experience and strengthen ties confirms this.
The IF industry in China is still far too fragmented, leading to all sorts of problems. Consolidation is happening from both in brand and manufacturing, BD know this and want a horse in the race. You only have to look at the US market where there are only three players with over 95% of the market; makes a lot more more sense from a regulatory/consumer and competitive point of view not to mention the ongoing trade up premium brands and a2 wave!
Well obviously if they did not pay the bond interest, the company would have to inform the exchange that they have not paid, and most likely would have to announce that they are in some kind of receivership/liquidation. These things have not happened, so I am 100% certain that bond interest has been paid.
It seems that Bright Dairy and a2 Milk cannot reach an agreement before July 15, the due date for Synlait to pay banks $130 m. When you can legally get something for $1, you would not donate $2 for it. If the share price is kept for trading by July 15, it would be 10 cents. By that time, it would be much easier for Bright and a2 to reach an agreement: paying bank debts back and leaving 10 cents to shareholders.
Question, does anyone know if Peno has sold his shares?
is
I asked the same question on HotCopper and a poster said “ Still showing as holding 5,109,803 shares or 2.34%”
and that’s my understanding too…
I respect my thoughts and opinions are just that, and I am not in anyway connected to the board or in the know about what’s going on around the SML table…
But let’s consider something, Peno was until very recently, very very connected and was I am sure a part of enough discussions or knowledge even if he was kept on the outer…
This guy is holding a decent parcel of shares…why?
Why hasn’t he sold? This process with SML has been going on for a while, and he has since left SML (or been ousted pretty much) so it would be fair to say he of all people should have sold right? Why would you sit back and take such a huge loss, 5 mil shares…unless he knows something we don’t?
I wouldn't read anything into it except that his shareholding (value) has been absolutely gutted, and it's irrelevant now to him how much of that was his own making. It would make no sense at all to sell out, at cents on the dollar, a massive eyewatering downside when potentially this whole thing has a recovery and he can still, one day, reap the upside. It's probably hobson's choice, hope for an upside by holding, or lose almost everything by selling now.
What would you do in his circumstance, now?
If Dr. Peno were really smart, he would have sold some of his shares when the price was over $10, and the Pokeno problem would not have been created.
I think there is no requirement for him to report if his shares were sold, as his shareholding is less than 5%, except for Bright or A2m buying his shares.
Anyway, his 5 m shares would be realized at a good price, for example, when Bright is slightly short of the 90% threshold for a compulsory takeover. There will be no restriction on the price Bright pays for his shares.
It could be he has borrowed against the shares- can’t sell em now, the banks will be calling
Panic sellers of SML010 bonds have vanished, and the share price seems stabilized.
Market stabilised at $63m market cap. So the market still thinks there is some value here. Today, anyway.
By definition, the majority of bond and fixed interest investors invest for income so capital preservation is paramount. Cannot fault them for selling out to preserve what’s left of their capital. And most of them rely on the advice of brokers/advisors who are dark on the prospects of SML.
And most shareholders would have concluded it's not worth selling anymore and take the long odds of the sp doubling from here when the magic fairy dust comes out. Anyone preserving their capital would be well and truly gone.
Double down, the Blues and Synlait. TAB should be all over this combo.
Yes, that’s a fair point, and could very well be the case.
I just can’t help thinking that the guy would be like anyone else, if it was actually as bad as it looks from the outside, and let’s face it he would have some knowledge of the reality, then surely you would sell out?
It doesn’t appear he has…
It's not too low to sell and not too high to buy stocks entirely depend on the fudementals, value and growth. In the past I couldn't sell it's not too low to sell type stocks.
I think he'll be sued by someone anyway- so selling is either impossible because he borrowed against the shares or it's such a red flag that lawyers have said no way.
John Penno imo would not have resigned unless he has received some assurances about what is going to happen with Synlait - his 5.1m remaining shares were at one time worth $60m. He did however sell over 1m shares back in 2018 for $10.80 per share so he probably does not feel all that aggrieved.
Guess he had faith in the company not to have sold more at the time but that's life.
[QUOTE=Rawz;1057553]Once worth $60m. Guttered....[/QUOTE
Yes, that “shoulda, woulda, coulda moment would way heavy on anyone for sure…
I think that was for the ex wife?
and I think he was pushed out...
Class actions are usually litigation funded like Manziel was
I've no clue if they have broken any laws or failed to perform their legal obligations bit I'm sure we will find out once this has played out.
Certainly seems to me that the whole saga is being managed in the interests of some shareholders at the expense of others. Time will tell
@ Bikeguy
Founders, or management that have been compensated in shares, almost never sell large blocks of shares on market. Not only can they not exit a large holding without crushing the market price even if they wanted to...by way of example todays turnover on the NZX was $17.5k..To do so would be viewed very very negatively by the rest of us unless the share price is compounding upwards year after year and/or can be justified as a "de-risking" of personal wealth.
No offence..but you seem to be asking a lot of questions on this forum that next to no one on here will have informed answers for.
If a large chunk of your net worth is on the line here then imo its time to seek professional advice rather then being guided by "sharetrader.co.nz" advice..
My opinion only..
GLTA.
Are there some investors still not familiar with what happened here?
https://www.linkedin.com/posts/natio...16119296-G6B2/
https://app.companiesoffice.govt.nz/...panies/5751329
https://app.companiesoffice.govt.nz/.../shareholdings
Nothing to apologise for asking questions. Up to others whether they want to engage and interact (answer, speculate or query further) but as is often said, better to ask and appear foolish for 1 minute but be enlightened, rather than keep quiet and stay ignorant for life.
SML is a very interesting situation and there are so many moving parts to consider before the situation is resolved.
In the end though, it is going to come down to one thing and imo, one thing only which will determine SML's fate.
I have enjoyed the Sharetrader Forum, I am not a big investor and other than kiwi saver I have $5 k spread across 5 shares, so I don’t want to take up anyone’s time on here, I just thought Sharetrader was a pretty open thing,
I can clearly see that some posters on here are seriously financially astute and financial professionals in their careers, I have benefited from reading their thoughts and posts, so I say thank you to them for taking the time to post,
Balance can I ask you, what do you think that one thing is that will determine SML fate? (And my 1k) lol
Bikeguy please keep posting and asking questions. They are questions many of us are mulling over as well. And it makes no difference whether you are a big investor or a smaller one. It is your hard earned money at stake so I understand you wanting to understand as much as possible about what is going on and what the potential outcome will be. We are all wondering the same thing. I dont think moimoi was criticising you for asking lots of questions rather it was his/her way of expressing concern for you if you had a large holding. That was my take on it. Good luck
Does anyone know why Jarden Direct restricts placing buy/sell orders to the last trading percentage plus/minus 2%? Currently, only orders between 170-174% will be accepted.
@balance Pretty sure it was litigation funded and was a creditor of Manziel action?
The liquidator of Mainzeal took the case against the directors and won. It was 100% not litigation funded.
https://norlinglaw.co.nz/reckless-di...ay-36-million/
Litigation funded cases in NZ are few and far in between.
Feltex was one and the case funded by litigants lost. Unfairly imo but that’s how the cookie crumbled. 3 QCs and an army of lawyers represented the defendants - that’s how much the insurance companies and defenders threw at the case.
The class action against A2M is pending the outcome of a similar class action in Australia.
I don’t know of any others.
There are certainly some professionals and experienced investors contributing on this site - posters have to watch out for who they are and what are their motivations!
Most contribute to share their knowledge and experience. And we should be thankful for that.
A few do so to take advantage of the newbies so be careful you do not become a sheep to the slaughter!
manziel funded by LPF: “In late 2014, the Mainzeal liquidators, on behalf of the creditors, approached LPF for funding to assist in taking legal action against the directors.”
https://www.lpfgroup.co.nz/post/main...-s-perspective
You mean this article?
https://www.nbr.co.nz/investment/pen...ays-a2-letter/
I don’t have a subscription so cannot elaborate any further.
This one
https://www.linkedin.com/posts/natio...16119296-G6B2/
Ouch very messy
This begins with a company called Trust Codes that offers product tracing technology to A2 and Synlait. Apparently Penno was not forthcoming to A2 that he was a shareholder of Trust Codes through his investment vehicle Okoura Holdings. Signum the main owner of Trust Codes was in financial trouble and one of its creditors was Okoura, Penno's investment vehicle. Penno sought to put them in receivership, which really annoyed A2 because they had a good working relationship with Trust Codes management and had they known Trust Codes was in trouble they would have provided financial backing to them. Okoura had the power to put Signum and Trust Codes into receivership which would have affected A2's business.
A2's David Bortolussi had concerns regarding Penno's position as Chair of Synlait and Shareholder of Trust Codes who Penno had a shareholding in and his wife was Chair of Trust Codes too, meaning they ultimately has influence in both companies A2 was a big customer to. Bortolussi said it was unacceptable to A2 being a shareholder and customer of Synlait that Penno influence both companies and withheld his interest in Trust Codes. Ultimately they were very annoyed that he could have disrupted their business if he had put Trust Codes into recievership, along with apparently a nasty email sent to Bortolussi with negative remarks about Trust Codes CEO.
Could be a big reason why Penno resigned recent from the board. His past conflicts with A2 probably does not sit well with them.
Thanks sb888.
Sounds indeed like John Penno should have removed himself earlier from A2M after the Trust Codes’ episode. Bright might have been unaware of what was happening between John, DB and A2M until it blew up in the courts.
Definitely would not have helped the working relationship between SML and A2M.
And then there was this - something very fishy going on here because soon after, A2M added more claims to arbitration with Synlait.
https://www.nbr.co.nz/investment/bad...company-claim/
https://www.nzx.com/announcements/433341
Synlait Milk Limited’s (Synlait) Special Shareholders’ Meeting will be held on Thursday 11 July 2024 at 2.00pm, in person at Synlait's Dunsandel facility, located at 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand, and online at: www.meetnow.global/nz
The meeting is to vote on the resolution to approve the proposed entry into a $130 million shareholder loan to be made available to Synlait by Bright Dairy International Investment Limited, a related company of Bright Dairy Holding Limited, Synlait’s 39.01% shareholder. If the resolution is approved, Synlait will fully draw down the loan to meet the $130 million payment due to its banks on 15 July 2024.
Importance of the resolution to Synlait’s future
Synlait will only be able to meet its $130 million payment obligation to its banks on 15 July 2024 if the resolution is approved by shareholders other than Bright Dairy by way of an ordinary resolution. An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.
If the $130 million payment is not made and the banks do not agree to alternative arrangements, the Board believes Synlait will need to cease trading or initiate a formal insolvency process.
Recommendation of Independent Directors
The Independent Directors of Synlait unanimously recommend that shareholders vote in favour of the resolution.
Voting intentions of major shareholders
Bright Dairy cannot vote in favour of the resolution; as such, the Directors appointed by Bright Dairy have abstained from making a recommendation.
Whilst as at the date of the notice of meeting Synlait and The a2 Milk Company Limited have engaged in discussions, The a2 Milk Company Limited has not determined how it will vote on the resolution. If Synlait is advised of a change of status of The a2 Milk Company Limited's voting intentions, it will update shareholders by way of market announcement.
The deadline for returning proxy votes is 2.00pm on Tuesday 9 July.
Independent appraisal report
In accordance with the NZX Listing Rules, the Board commissioned an independent appraisal report for shareholders to support their consideration of the resolution. Shareholders should read the report prepared by Northington Partners in full alongside the notice of meeting. Both documents (released with this announcement) contain important information that should be carefully considered before voting. Overall, the independent appraisal report concluded that the terms and conditions of the shareholder loan are fair to Synlait shareholders not associated with Bright Dairy.
Banking facilities update
Included within the Notice of Meeting is an update on Synlait’s existing banking facilities.
As announced on 2 April 2024 at the half year result, the banks agreed to short-term covenant relaxation in the company’s existing facility to provide time to reduce debt. Since that date, Synlait has requested waivers in respect of its leverage ratios and interest coverage ratio, and a deferral of the maturity/limit step downs of relevant facilities through to the end of July 2024.
The banks’ agent has confirmed that each of the banks have received credit approval to the covenant waivers and the deferral of the relevant maturity/limit step downs in June and July until such time that Synlait’s planned equity capital raising is completed. The approval is subject to the addition of a covenant to achieve minimum adjusted EBITDA for FY24 of $45 million.
Synlait and the banks are in the process of negotiating the documentation for these waivers and satisfying any applicable conditions. Further information can be found in the Notice of Meeting.
Synlait Chair George Adams commented: “Synlait is now progressing at pace a series of structural initiatives to address the scale of challenges we face today.”
“We are committed to resetting Synlait’s balance sheet, with the support of Bright Dairy, to ensure we return to a position where we can deliver the growth potential we see in our core Advanced Nutrition and Foodservice businesses.”
“The Board and management have spent considerable time aligning on Synlait’s business recovery plan for this financial year and next, focusing on reducing debt, accelerating volume growth, and optimising cost and operational performance. We are committed to delivering on this for the benefit of all our stakeholders – customers, farmers, shareholders, staff, and suppliers.”
On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”
“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”
“Bright Dairy fully supports Synlait raising equity capital, subject to finalised terms and all necessary approvals being received, to more substantially reset the company’s equity and debt position to provide a platform to return to sustainable growth for Synlait’s farmers and all shareholders.”
The Synlait Board, management, and its advisers are continuing to progress the structure, terms and conditions of a proposed equity raising and will further update shareholders by the end of August, possibly earlier, by market announcement.
For more information contact:
A2 not yet saying whether they support it or not
So if bail out does not take place, is when negotiations that have already taken place have been decided between Bright and A2M to take over company. Or are there other options?
looks like a2 playing hardball by saying they havnt decided on vote intentions. probably want even lower prices they have to pay synliat for there vote
They would have canvassed joint takeover as an option but for whatever reason, have decided not to pursue that option.
No other option on the table - it's either the Bright loan (terms look perfectly reasonable - much to my surprise) or insolvency given the time frame involved.
Unless A2 wants to launch a takeover bid - LOL.
Terms of the loan: (on these terms basically kicking the can down the road till they get the capital raising done)
First 12 months of the Loan, interest is payable quarterly at 8% pa. If the extension option is exercised, the interest rate resets and will be equal to quarterly BKBM + 1.60% pa (payable quarterly). In certain circumstances (where an “Interest Deferral Event” exists), Synlait has the right for interest to be capitalised rather than paid in cash
All in the hands of A2 right now with 33% influence on the vote, they will also be considering the effects of this loan and further down whether they want to be participating in the capital raise:
Bright is not able to vote in favour of the Shareholder Loan. A2 Milk holder of 19.8% of the shares (which equates to approximately 33% of the votes eligible to be cast on the resolution), will be influential in determining the outcome of the resolution to approve the Shareholder Loan.
Capital raising fully supported by Bright and will increase overall percentage holding of the company, especially if many shareholders are absent in the raise:
We believe that Bright's shareholding in Synlait is likely to increase as a result of the Equity Raising. In these circumstances, Bright’s participation in the Equity Raising would require shareholder approvals under both the NZX Listing Rules
What a disaster. $0.29 per share. $69m market cap. What would I do if I found myself holding right now? hmmm. Is it better to sell (assuming there are buyers) and move to safer bets? Where is the best upside, there sure is upside here. Where is the least downside? Definitely not here.
I would bet the loan goes through with high probability (90% like). But get it wrong and it's 100% loss of todays investment. Compared to bets elsewhere, get it wrong (profit downgrade) at say TWR or 2CC and downside is not very much. Not 100% like SML...
If it was less than 5% of my portfolio i would stay invested. If over this I would sell and move to safer bets with upside and very little downside.
Just rambling here,,
"On behalf of Bright Dairy Appointed Directors, Director Julia Zhu commented: “In line with Bright’s long-term support of the New Zealand agriculture sector, in particular, Synlait’s business, its farmers, staff, and all shareholders – this $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”
“We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets. Notwithstanding Synlait’s short-term challenges, we see a pathway to growth and future value, and we will continue to work closely with the Board and management team to do what we can to help with the company’s turnaround plan.”
My interpretation: Bright Dairy has options if A2M votes against the loan, there is no way A2M could cheaply buy the Dunsandel plant, and small shareholders and bondholders do not need to worry about being left with nothing.
A2 can't let Synlait fail since it holds the SAMR in its name, so never mind the assets they need the company itself or their business may be interrupted. They will approve the loan and participate in the capital raise, or they will vote to not approve and launch a takeover of Synlait by way of a merger with Bright getting shares in A2 and a board seat, along with a partnership agreement.
I am not sure this is right. If Synlait goes down, the SAMR is not lost. It is just that management of what was Synlait, transfers from 'the Synlait team' to 'the receivers team'. The receivers would realise that a key part of the value of what they now manage, is the ability of the Dunsandel plant to supply ATM, where the SAMR is critical. The receivers would be crazy to pull the plug on an arrangement like that, critical to valuing the underlying assets they would have for sale. The way I see it, Synlait 'going down' might benefit A2 because:
i/ It would put to bed the current supply agreement fracas with Synlait management, who would be gone.
ii/ They would retain the milk product supply contract with the Dunsandel plant, but possibly on more favourable terms, because the receivers would be desperate to keep the contract going.
Sure A2 would lose the equity they have already put into the Synlait business (although in fairness that realistically went out the door some time ago). But taking the forward looking view only, it looks like receivership for Synlait would suit A2 very well. What am I missing?
One thing I could be missing is the risk of an unnamed third party snatching the Dunsandel assets. But such a third party when bidding would have to also factor in signing up new supply contracts to replace all the existing farmers who want out. Otherwise they would just be buying a milk plant with no milk to process, which doesn't sound like a value proposition. So A2 may have already figured out that, should Synlait go into receivership, no-one would realistically be able to outbid them for those Dunsandel Assets when they are eventually resold. And only A2 as a dairy company is in a strong enough position to offer farmers threatening to leave the Synlait supply chain, a milk price good enough to keep them from going.
SNOOPY
A change in SML’s ownership will also trigger a review of the SAMR.
Receivership and the sale of assets at a discount are not acceptable to Bright Dairy for a very simple reason: The board members representing Bright Dairy would be sent to jail in China. They should have reached an agreement with Chinese banks in New Zealand to force A2M to pay a premium to assets should it buy the Dunsandel plant.
Theres a few scenarios that could go wrong if A2 decides to play with fire:
1. If they upset Bright they may use their political capital to have the SAMR revoked or not renewed in the future
2. If a big player with market share in China's infant formula wanted to deal a deadly blow to A2's market share in China they would take Dunsandel, theres big companies with much deeper pockets than A2 out there. Even Abbott may take an interest since Synlait is approved to produce infant formula for them in the US.
3. Bright might end up with Dunsandel since it values those assets quite highly