Freedom Foods sells remaining stake in milk marketer a2 Milk for A$64 mln
By Fiona Rotherham
Nov. 17 (BusinessDesk) - A2 Milk Co’s cornerstone shareholder, Freedom Foods Group, has sold its remaining 10.4 percent stake in the milk marketing company for A$64 million, taking advantage of a surge in the share price.
Sydney-based Freedom Foods sold its remaining shares for 85 Australian cents apiece and will reinvest the proceeds in other investments including a buy-out of oat-based cereal and snack manufacturer Popina and construction of a new UHT processing facility.
Freedom Foods, which is controlled by the Perich family, said last month that it intended to maintain a strategic stake in the company and continue supplying it with production capabilities and milk supply. It had then sold 42.5 million shares, reducing its stake from 17.9 percent, after its punt at a takeover with Texas-based food and beverage company Dean Foods was rejected by a2's board as inadequate. It had originally built up a cornerstone stake of 19 percent.
Recent significant share price appreciation in a2 had led the group to form the view that the “opportunity cost arising from the market value of the funds now employed in the holding would now be better utilised by being applied activities and businesses in respect of which the group has either 100 percent ownership or significant ownership and control interests,” Freedom Foods said in a statement to the Australian stock exchange.
A2 Milk’s share price is up 5.1 percent to 88.25 Australian cents on the Australian stock exchange and 6.6 percent to 97 cents on the NZX. The shares have jumped 31 percent in the past week on the NZX following reports of growing demand in Australia for infant formula.
Freedom will continue to provide a2 with production capabilities and milk supply through its group and associated entities, it said.
A2 chief executive Geoff Babidge was unavailable for comment.
At its annual meeting in Auckland today, a2 raised its forecast revenue and earnings for the current year as sales of infant formula across Australasia and in China track ahead of expectations. It now expects earnings before interest, tax, depreciation and amortisation of $22 million on revenue of $285 million in the year ending June 30, 2016. That's an improvement on the previous forecast for earnings of $12 million on sales of $267 million, and up from ebitda of $4 million on revenue of $154 million in 2015.
The company today said its a2 Platinum-branded infant formula generated sales of $38 million in the four months ended Oct. 31, or about 47 percent of group revenue, and are tracking ahead of plan in Australia, New Zealand and China. That compares to annual infant formula sales of $41.7 million in the 2015 financial year.