ATM - A2 Milk Corporation Limited

[NT001]

Maybe this news item in today's The Australian (paywalled) helps explain what's been going on with the ATM share price lately. The timing is interesting. As I've suggested previously, the Perich family look like the most likely candidate for a takeover of A2MC, rather than one of the big international players.

They own 60% of Australia's Freedom Foods which is the biggest single shareholder in ATM with nearly 19%. Their Lepparton dairy farming operations were among the early suppliers of A2 milk in NSW. Although this report makes clear the family are backing dairy products generally, not just A2, the last paragraphs give an interesting insight into their strategy and their belief in the superiority of A2.

Perich empire to pour $100m into dairy operations

• The Australian
• October 27, 2014 12:00AM

THE billionaire Perich family is working on ploughing as much as $100 million into its dairy empire in a bid to capitalise on soaring demand for milk products in Asia and to encourage more farmers to return to the industry.
Family patriarch Tony Perich, who is managing director of the Perich Group, said the spending would be across its suite of companies, including new milk manufacturing plants, new products and buying up farms.
The Perich family’s Leppington Pastoral Company milks more than 2000 cows at its state-of-the-art dairy near Bringelly in western Sydney.
It also has a 60 per cent stake in listed food company Freedom Foods, which makes allergen-free breakfast cereals, as well as fresh and long-life milk beverages and seafood.
Freedom in turn owns a stake in the New Zealand-listed A2 Milk Corporation, which makes high protein milk that is easier to digest.
The family’s wealth in this year’s BRW Rich List topped $1 billion for the first time, putting it among the 40 billionaires in the nation.
“I can tell you we are looking to go bigger into dairy ... I believe in the industry,’’ Mr Perich told The Australian.
“We will probably put about $100m into it. That depends if we can get enough milk. But if we have to, we will.’’
In April, Freedom’s Pactum Dairy Group announced an agreement to supply premium long-life milk to Bright Dairy, one of China’s largest dairy *companies.
It also supplies to A2 Corporation, New Hope Dairy in Chengdu, Shenzhen JLL in Guangzhou and is in advanced negotiations to sell fresh Australian milk on the booming Ali*baba online retail platform in China.
Earlier this year, A2 struck a deal to supply fresh milk direct to homes in Beijing, Shanghai and Guangzhou through Chinese online retailer Jingdong.
Pactum is now expanding its Sydney operations at a new site in Ingleburn that will open next year, as well as growing capacity at its Shepparton plant in Victoria. In August it bought a $4m neighbouring property to its Shepparton plant to more than double its land size.
Morgans analyst Belinda Moore said last month that it expected to see “a large step change in Pactum’s margins in FY17’’ from the Ingleburn investment.
“Now we are encouraging farmers to come back into the industry by exporting overseas. We do believe there is a big market for UHT and long-life milk. If you have a modern factory and keep your costs down, I believe you can certainly compete in the market overseas,’’ Mr Perich said, adding that he was passionate about the future of the dairy industry.
“We have the best farmers in the world, but they don’t get *treated like that. There is too many people going bankrupt, committing suicide in the farming industry because they are not getting a fair return on their *product. And that is not right,” he said.
Freedom Foods is on the lookout for further Chinese partners for its dairy business and Mr Perich said he and his brother Ron as well as chief executive Rory *Macleod had visited China to meet the company’s current and potential new partners.
“Why did my brother and myself go over to China? Because they want to meet the owners. After talking with them, they were very happy with us. They saw we were genuine farmers. You have to go over and see these people,’’ he said.
“If you can be honest with the Chinese and not try to put one over them, they will be very loyal to you. I think we trust them more than they trust us. That is a *problem.’’
Freedom’s share price has risen from about 75c in April last year to as high as $3.25 at the start of last month. The shares closed on Friday at $2.87.
Mr Perich said the family would never sell below the 50 per cent level.
“Our management knows that if we drop below 50 per cent, we are out of this company. Unless we can keep controlling the direction where we think it should go, we would not be involved,’’ he said.
But he added that it was *important the company had an independent board.
“We have an independent chairman and we like to have some independence — that is important.’’
Malcolm Riley, head of nutritional research at CSIRO’s Animal, Food and Health Sciences division in Adelaide, claimed in April that some claims made about the health benefits of A2 milk were “staggering”.
A2 contains a different type of protein from regular milk: beta-casein A2.
Asked about the comments, Mr Perich replied: “All milk is good, but A2 milk is better for some people and you can feel the difference. Try it,” he said.
“We know there are benefits in it, but to get that proven, that takes years.
“What I am saying is, you don’t have to believe it. But once you go on to A2 milk and you have drunk it for a month, you will feel *different. A2 milk will never *rubbish ordinary milk. All milk is good. It’s just A2 is better.’’

[NT001]

Hah! I see you just beat me to it MAC. I was just trying to get around the paywall barrier I ran into.

[MAC]

Hah! I see you just beat me to it MAC. I was just trying to get around the paywall barrier I ran into.

No worries, it does seem with The Australian that if you google for articles you get them for free, but the direct link becomes blocked for some reason, just one of those random acts of internet.

[Kiwi]

I was in Byron Bay two weeks ago and was amazed at the amount of A2 milk available in the supermarket.
Was able to try the light blue for several days and I'm sure I felt better in the tummy region.
Unfortunately I cant get it here in Palmerston North at the moment.

[BFG]

I was in Byron Bay two weeks ago and was amazed at the amount of A2 milk available in the supermarket.
Was able to try the light blue for several days and I'm sure I felt better in the tummy region.
Unfortunately I cant get it here in Palmerston North at the moment.

I picked the regular stuff up at Countdown a week ago. Pretty good stuff, but going back to lactofree when it's available.

[nextbigthing]

So let me get this straight

1) A while ago Freedom Foods (majority owned by the Australian Perich family) publicises a statement that they 'retain the right to sell down their substantial ATM holding', concerning some in the market even though it was really just a hollow statement.

2) ATM shares undergo a (IMHO) rather suspicious regular pattern of trading driving the price down in which time no SSH notices are issued from buyers or sellers (barring the earlier ones from Milford buying)

3) This trading didn't occur on Australia day

4) Over the last few days comments have been by others on the site that the selling appears to have stopped (price has since appreciated slightly).

5) A couple of days later the Perichs claim they have $100m to spend up on 'dairy investments' in a major article that very much talks up their love and belief of A2.

If that's just coincidence then it's very uncanny - chances are probably similar to winning lotto.

NBT

[nextbigthing]

I picked the regular stuff up at Countdown a week ago. Pretty good stuff, but going back to lactofree when it's available.

Excellent. Please let us know what you decide to have for dinner.

[BFG]

Excellent. Please let us know what you decide to have for dinner.

The Next Big Thing that wanders into my yard, prepared with a fine white sauce made with creamy A2

[NT001]

If that's just coincidence then it's very uncanny.

NBT

Coulcn't agree with you more NBT

[Harrie]

NT. IMHO I don't think Freedom will make a T/O bid any time soon although they certainly may increase their shareholding higher than where they are at the mo. I really do not see any immediate imperative to do this. Fairly easy to increase shareholding currently though by getting the weak sellers to off load around the 59 mark, then excite a few more by gradually upping the buy price up into the low 60's. If Perich is wanting a bigger exposure to dairy then he won't be doing it through Freedom foods and whatever entity he is doing this through may be below the 5% threshold, if they are indeed doing it at all despite their positive comments coming through about A2. Interesting to see what happens next week but I am not expecting much