MercoPress. South Atlantic News Agency

China buys controlling stake of New Zealand milk processor

Fresh reliable milk for Chinese children

Bright Dairy & Food Co., a unit of Shanghai’s biggest food company, agreed to buy a controlling stake in Synlait Milk Ltd., a New Zealand milk processor planning to double capacity at its South Island plant.

Bright Dairy will pay NZ82 million (58 million USD) for a 51% in Synlait Milk, Synlait Ltd., its Christchurch-based parent company, said in a statement. Synlait, 22.5% owned by Japan’s Mitsui & Co., will retain a 49% stake and separately keep 100% ownership of its dairy farms in the biggest world’s biggest diary exporter.

Synlait, which last year shelved a share sale to fund expansion because of a lack of investor demand, said it will increase the capacity at its South Island plant to about 100,000 metric tons of milk powder a year. Some of extra production will be specialist infant formulas, which will be sold in China in partnership with Bright Dairy.

“Our strategy is all about us becoming a leading supplier of high value premium infant formula, particularly for the Asian market” Synlait Chief Executive Officer John Penno said on a conference call from the Dunsandel plant site.

The approval is subject to NZ regulatory approvals, including foreign investment clearance. The company doesn’t anticipate any objections because the proposal involves a processing asset and not farm land, Synlait Chairman Graeme Milne said on the call.

Synlait built a plant about two years ago, and expects to produce 55,000 tons of powder this year, Penno said. Bright “is the leading domestic player in the value ad area and it provides us immediate access to that very large market.”

Bright Dairy is 65% owned by Bright Food Group Co. the biggest food company in Shanghai, which earlier this month failed in a bid to buy the sugar unit of CSR Ltd.

Bright Dairy sales in 2009 reached 1.17 billion US dollars, up 8% over the previous year with profits of 27.8 million US dollars compared to a loss of 47 million USD in 2008 because of the melamine scandal.

The operation comes amid renewed concerns about the quality of Chinese milk. Chinese authorities said this month they had found 25,000 tons of milk powder tainted with melamine, responsible for the deaths of several babies two years ago.

The babies’ deaths and 300,000 others were made ill rocked China’s dairy industry.