The A2 milk company has announced it has signed agreements to buy 75 per cent of a South Island New Zealand milk powder producer at a cost of NZD $268 million.
Mataura Valley Milk's current majority shareholder, China Animal Husbandry Group (CAHG), will retain a 25 per cent interest in MVM alongside a2.
A2 chief executive officer, Geoff Babidge, said the acquisition will be undertaken on a debt-free cash-free basis and funded from a2’s existing cash reserves.
Mr Babidge said the company has started an expansion plan for the MVM facility.“With the business currently producing a high proportion of commodity milk powder products, our plans for MVM are to support its transition to being a manufacturer of predominantly consumer packaged nutritional products for a2MC over the medium term.“In order for MVM to produce consumer packaged nutritional products, a blending and canning facility and associated infrastructure will need to be established, which would require an additional investment in the order of NZ$120m over the first two to three years following completion of the transaction.”
Mr Babidge said the proposed acquisition will provide the opportunity for a2 to participate in nutritional products manufacturing, provides supplier and geographic diversification, and strengthens our relationship with key partners in China.