UPDATE: A2 shareholder Freedom Foods in consortium to take over milk marketer
(Updates with Freedom Foods comment, share prices)
By Fiona Rotherham
June 22 (BusinessDesk) - A2 Milk Co's cornerstone shareholder, Freedom Foods Group, is part of a consortium with an international dairy group that's eyeing a takeover of the dual-listed milk marketer.
Freedom Foods, which owns about 19 percent of A2 Milk with a related entity, is mulling a takeover of A2 Milk, making an indicative non-binding and conditional expression of interest to buy the shares it doesn't already own. A deal would be contingent on the consortium, which includes an "unnamed leading international liquid dairy milk company", undertaking due diligence. It also has a restriction on A2 Milk changing the number of shares on issue, effectively scotching a planned equity raising.
"Freedom Foods is a significant shareholder in A2M, with a long history and strong commercial ties to the company, including through its largest shareholder, the Perich Group," it said in a statement to the ASX. "Freedom Foods will keep the market informed of any material developments in compliance with its continuous disclosure obligations.
A2 Milk shares climbed 16 percent to 66 cents on the NZX, while ASX-listed Freedom Foods gained 11 percent to A$3.10.
The parties have requested confidentiality and warned their expression of interest could be withdrawn if their names become public, A2 Milk said in a statement.
The Australian reported China's New Hope Group may also be involved in the consortium after they entered into a joint venture earlier this year to buy dairy assets.
Other conditions for the proposal include exclusivity, no material adverse change in the company’s affairs, and New Zealand Overseas Investment Office approval.
A2 Milk’s board is seeking further information in order to evaluate the proposal before updating the market and said no further comment would be made at this time.
Freedom Foods is represented on A2 Milk's board by Mervyn Miles while managing director Geoff Babidge, general manager international development Simon Hennessy, and chief executive Australia and New Zealand Peter Nathan are also alumni of the ASX-listed firm.
When A2 Milk listed on the ASX earlier this year it didn’t include a capital raising despite a launch into the US market with fresh milk, budgeted to cost around US$20 million over the next three years.
The company markets its products as potentially beneficial for people who suffer intolerance to the naturally occurring A1 protein in milk, including bloating and stomach pain. A2 Milk has captured some 9.3 percent of the Australian fresh milk market by selling milk that only has A2 protein.
Earlier this month A2 Milk said it was suing the Australian Broadcasting Corporation alleging misleading and deceptive statements in advertising its consumer affairs programme, The Checkout.
A2 Milk's Australian subsidiary has lodged actions in the Federal Court in Sydney after the public broadcaster promoted a segment that called the company's scientific claims "bogus". A2 Milk claims this was a breach of the Competition and Consumer Act. ABC rejected the suggestion that the matters A2 Milk had complained about involved misleading or deceptive conduct.