SML - Synlait

[CG]

The SAMR will be for Synlait Ltd Dunsandel. If Synlait no longer exists what then? The new owner of Dunsandel can't be forced into a contractual relationship with A2.

I wonder how long it would take for a new SAMR with new owners name on it.

If production facility changing hands in sale/purchase agreement reconfirming SAMR is usually a part of that agreement and confirmation itself is usually a matter of signing up relevant papers by Chinese authorities. So far I haven't heard that somebody had any problems with that.
Also, usually with the purchase new owner takes on all obligations (unless business is a bankrupt) including (but not limited) contracts and debt repayments. They can cancel contract as stated above, but as I said before no owner in their right mind would do that in this situation.

[Left Field]

There really will be text books written about Synlait.

.... and A2. My interest has been in the whole A2 story right from the initial research and then the big step via a  'capital light' marketing brand based approach.

The key for A2 now is how it transitions from 'capital light' to 'dedicated A2 production.'.... or a mix of the two with contracted production still playing a role (well at least for the next 3 yrs or so.)

One thing that may have been overlooked in your discussions is ATM's ongoing litigation with SML. Not a major card.... but still an interesting card yet to be played..... and possibly worth a few $ million extra costs to SML.

FWIW I still hold some 'free-hold' ATM and am keen to ramp my ATM up again if/when I see which way the wind blows in the possible deals you and Teitei (and more recently CG) outline so well.

[Teitei]

Why Bright Dairy Can't and Won't let Synlait fail

https://businessdesk.co.nz/article/primary-sector/why-bright-dairy-cant-and-wont-let-synlait-fail
paywalled

[CG]

One thing that may have been overlooked in your discussions is ATM's ongoing litigation with SML. Not a major card.... but still an interesting card yet to be played..... and possibly worth a few $ million extra costs to SML.

Afaik there is no ongoing litigation between A2M and Synlait. I suspect what you meant was "confidential binding arbitration process to determine the validity of the notice of cancellation of the exclusivity arrangements under the NPMSA". To be honest, I do not see it as some major event that could significantly change course of direction for either company in the near term. If the notice stands A2M will have their hands untied with ability to source a2 platinum for China and AU/NZ markets from any other supplier. It might and will reduce Synlait's involvement in production but it will not happen overnight. If Synlait wins - it's pretty much business as usual for now and A2M will need to find a way how to overcome that exclusivity and this is what they are working on now by developing new products with new partners, looking to apply for another SAMR and possibly will give notice of cancelation to Synlait later down the track

[Minimoke]

How odd. Bright don't have approval from their baord yet to advance the loan.

"As the specific matters of this loan are still in the negotiation process, there are uncertainties, and they still need to be submitted to the board of directors of the company, the board of directors of New Zealand Synlaite and the general meeting of shareholders for deliberation, there is a risk of failure to pass the approval, please pay attention to the investment risks. The company will fulfill the information disclosure obligation in a timely manner according to the progress of the loan, and investors are requested to refer to the announcement issued by the company. 1 2 Notice is hereby made. Board of Directors of Bright Dairy Co., Ltd. 4 June 2024

[Teitei]

How odd. Bright don't have approval from their baord yet to advance the loan.

"As the specific matters of this loan are still in the negotiation process, there are uncertainties, and they still need to be submitted to the board of directors of the company, the board of directors of New Zealand Synlaite and the general meeting of shareholders for deliberation, there is a risk of failure to pass the approval, please pay attention to the investment risks. The company will fulfill the information disclosure obligation in a timely manner according to the progress of the loan, and investors are requested to refer to the announcement issued by the company. 1 2 Notice is hereby made. Board of Directors of Bright Dairy Co., Ltd. 4 June 2024

Nothing odd at all.

Need to read the whole article to get an appreciation of why Bright issued the warning.

Businessweek is particularly vigilant about protecting the copyright of its articles so if you want to know more, you are simply going to have to subscribe.

[Minimoke]

Nothing odd at all.

Need to read the whole article to get an appreciation of why Bright issued the warning.

Businessweek is particularly vigilant about protecting the copyright of its articles so if you want to know more, you are simply going to have to subscribe.

Its a quote from a stock exchange announcement. Not a businessweek article.

[bulltrap]

Its a quote from a stock exchange announcement. Not a businessweek article.

The official announcement is available from the SSE here, in Chinese.

Here's a translation, courtesy of ChatGPT (not proofread for accuracy):

Stock Code: 600597
Stock Abbreviation: Bright Dairy
Announcement Number: Temporary 2024-021

Bright Dairy & Food Co., Ltd.
Indicative Announcement on Providing Loans to Subsidiary Synlait in New Zealand

The board of directors and all directors of the company guarantee that the content of this announcement does not contain any false records, misleading statements, or major omissions, and bear legal responsibility for the truthfulness, accuracy, and completeness of its content.

Important Risk Alerts:

The matter of providing loans to the subsidiary Synlait in New Zealand needs to be submitted to the company's board of directors, the board of directors of Synlait in New Zealand, and the shareholders' meeting for review. There is a risk of not passing the approval, and investors are advised to pay attention to the investment risk.
The matter of providing loans to the subsidiary Synlait in New Zealand needs to be filed with the Shanghai State-owned Assets Supervision and Administration Commission (SASAC).
Bright Dairy & Food Co., Ltd. (hereinafter referred to as "the company") subsidiary Synlait Milk Limited in New Zealand (hereinafter referred to as "Synlait in New Zealand") released an announcement titled "Market Update: Deleveraging Plan, Bank Covenants, and Guidance" on the Australian Securities Exchange on June 3, 2024. This announcement mentioned that the company plans to provide a loan of NZD 130 million to Synlait in New Zealand.

The company intends to provide a loan of NZD 130 million to Synlait in New Zealand (hereinafter referred to as "this loan"). Specific matters are still under negotiation. According to relevant regulations, this loan needs to be submitted to the company's board of directors, the board of directors of Synlait in New Zealand, and the shareholders' meeting for review. In accordance with relevant regulations, this loan needs to be filed with the Shanghai SASAC.

As specific matters regarding this loan are still under negotiation and need to be submitted to the company's board of directors, the board of directors of Synlait in New Zealand, and the shareholders' meeting for review, there is a risk of not passing the approval. Investors are advised to pay attention to the investment risk. The company will timely fulfill its information disclosure obligations according to the progress of this loan matter. Investors are advised to refer to the announcements issued by the company.

Hereby announced.

Board of Directors of Bright Dairy & Food Co., Ltd.
June 4, 2024

[bulltrap]

BTW, it's interesting that Bright seems to be referring to Synlait as their subsidiary.

Not sure if that's a mistranslation, a misunderstanding on their part, or if they're tipping their hand as to where they see this heading.

[Teitei]

BTW, it's interesting that Bright seems to be referring to Synlait as their subsidiary.

Not sure if that's a mistranslation, a misunderstanding on their part, or if they're tipping their hand as to where they see this heading.

Lost in translation?

[Minimoke]

The official announcement is available from the SSE here, in Chinese.

Here's a translation, courtesy of ChatGPT (not proofread for accuracy):

Yup. Just as I said.

[BlackPeter]

BTW, it's interesting that Bright seems to be referring to Synlait as their subsidiary.

Not sure if that's a mistranslation, a misunderstanding on their part, or if they're tipping their hand as to where they see this heading.

A subsidiary is (according to Dr. Google) "a company controlled by a holding company"

Bright Dairy does control Synlait, i.e. - the text only describes the facts.

Note: control does not mean fully owned ...

[bulltrap]

A subsidiary is (according to Dr. Google) "a company controlled by a holding company"

Bright Dairy does control Synlait, i.e. - the text only describes the facts.

Note: control does not mean fully owned ...

Majority ownership is generally a condition for a company being considered a subsidiary. (Which makes sense, considering a company can only be a subsidiary of at most one holding company.)

Can you cite anything official not from Bright, that claims Synlait is a subsidiary of Bright?

This page on Synlait's website is curious - it mentions Bright taking a 51% stake, but not that it no longer holds a majority stake. Good information is hard to come by.

[BlackPeter]

Majority ownership is generally a condition for a company being considered a subsidiary. (Which makes sense, considering a company can only be a subsidiary of at most one holding company.)

Can you cite anything official not from Bright, that claims Synlait is a subsidiary of Bright?

This page on Synlait's website is curious - it mentions Bright taking a 51% stake, but not that it no longer holds a majority stake. Good information is hard to come by.

Have a look at the NZX exemption Synlait has. Bright always kept board control, even after they gave up their 51% majority. 4 of 8 board seats are determined by Bright.

The following is a link to Synlait's waiver application ... looks however NZX purged it in its database (its 11 years old):

https://www.nzx.com/regulators/NZXR/announcements/237725

Clearly - dataspace is more expensive than full disclosure . Better don't rely on the NZX, a good memory is priceless ;

Anyway - I found a newer copy of the waiver ... here it is:

https://www.nzx.com/announcements/420643

[CG]

The document that nobody read but has information everyone wants to know is here https://www.synlait.com/wp-content/uploads/2018/10/Synlait-Milk-Investment-Statement-and-Prospectus_Make-More-From-Milk.pdf
You all might be interested in section 1.3 in particular.