SML - Synlait Milk Ltd

[bull....]

Some more context (from the NZSA assessment document)

From Bright Dairy’s perspective, there are some practical issues that prevent a formal agreement, partly relating to their status as a listed entity on the Shanghai Stock Exchange. Nonetheless, we are pleased to have received the following statement from Bright:
“As the company returns to a more stable financial position, our commitment to all Synlait shareholders is that Bright will strongly advocate to ensure you are afforded an opportunity to participate in the next capital management initiative to improve liquidity in the stock and drive future growth and value of the business.”

NZSA believes that this statement allows minority shareholders to place a greater degree of trust that the intentions of Bright Dairy are indeed aligned with those of minority shareholders – with a clear reference to both capital management and liquidity offering meaningful context for enhanced minority participation in future.

In our blog commentary on August 25^th, NZSA was underwhelmed by the lack of consideration for minority shareholder participation in the selected capital raise structure. Regardless of the potential “take-up” by shareholders, we believe that Synlait’s investment advisors unwittingly exposed the company to an increased probability of shareholder activism that could have had a negative impact on the proposal, as evidenced by the complaint made by Dr. John Penno.

....................... lol

[Oliver Mander]

OK bull....
I'll bite - why lol?

[bull....]

I was laughing as i see bright statement as strategic nothing else.

[Oliver Mander]

I was laughing as i see bright statement as strategic nothing else.

Thanks bull....
As noted, this ultimately comes down to trust (as is the case with many entities listed on the NZX).
NZSA continues to believe that a similar placement structure could have been supported by a share purchase plan for minorities. But that was not the proposal made to shareholders.
In the context of the offer structure, there is some solace in the commitment made by Bright.

Notwithstanding that, the proposal still represents a difficult trade-off - as we have stated throughout the process.

[Putrimacan]

I find this whole palaver of a process, very frustrating it has gone from being a rescue to becoming perceived as a takeover. The whole process should’ve involved the minority shareholders. Even if most of the minorities shareholders wouldn’t have taken up the offer and bright and A2 could’ve bought an at a cheaper price. The lack of trust caused by this has a massive amount of value (cost)to it. Now there’s a lot of trust being lost and a bad taste in the community. As a community member, former supplier and shareholder, I know there’s a lot of suppliers, no longer have as much faith and belief in Synlait as what they did only a few weeks ago let alone the level of trust they had a couple years ago.
A lot have given notice to cease supplying, this whole “Independent board member directed option” to only involve A2 and Bright dairy is certainly pushing my fellow farmer to look elsewhere. If too many more suppliers are lost, then you haven’t got enough suppliers to preform and you don’t have a Dairy company. That Independent board member needs to be Sacked for their short sightedness.
I see that any which way A2 and Bright went about it they would have gotten their way. They have the numbers. Now I wonder if the process will cost them the supplier base and trying to woo them back at what cost?
Love to hear your thoughts.

[Oliver Mander]

I find this whole palaver of a process, very frustrating it has gone from being a rescue to becoming perceived as a takeover. The whole process should’ve involved the minority shareholders. Even if most of the minorities shareholders wouldn’t have taken up the offer and bright and A2 could’ve bought an at a cheaper price. The lack of trust caused by this has a massive amount of value (cost)to it. Now there’s a lot of trust being lost and a bad taste in the community. As a community member, former supplier and shareholder, I know there’s a lot of suppliers, no longer have as much faith and belief in Synlait as what they did only a few weeks ago let alone the level of trust they had a couple years ago.
A lot have given notice to cease supplying, this whole “Independent board member directed option” to only involve A2 and Bright dairy is certainly pushing my fellow farmer to look elsewhere. If too many more suppliers are lost, then you haven’t got enough suppliers to preform and you don’t have a Dairy company. That Independent board member needs to be Sacked for their short sightedness.
I see that any which way A2 and Bright went about it they would have gotten their way. They have the numbers. Now I wonder if the process will cost them the supplier base and trying to woo them back at what cost?
Love to hear your thoughts.

Hi Putrimacan..an extract from the quote above. Basically we agree - as we said in our original article, NZSA thinks it is in Bright's interests to ensure meaningful participation on a long-term basis by minority shareholders.
"In our blog commentary on August 25^th, NZSA was underwhelmed by the lack of consideration for minority shareholder participation in the selected capital raise structure. Regardless of the potential “take-up” by shareholders, we believe that Synlait’s investment advisors unwittingly exposed the company to an increased probability of shareholder activism that could have had a negative impact on the proposal, as evidenced by the complaint made by Dr. John Penno."

In our view, SML's investment advisers have severely undercooked the long-term risks of NOT involving minorities in the capital raise - and that includes supplier risks as well as shareholders.
But again - as of right now - we can only work with the proposal on the table. A failed SML doesn't do shareholders any favours either.

[blackcap]

I find this whole palaver of a process, very frustrating it has gone from being a rescue to becoming perceived as a takeover. The whole process should’ve involved the minority shareholders. Even if most of the minorities shareholders wouldn’t have taken up the offer and bright and A2 could’ve bought an at a cheaper price. The lack of trust caused by this has a massive amount of value (cost)to it. Now there’s a lot of trust being lost and a bad taste in the community. As a community member, former supplier and shareholder, I know there’s a lot of suppliers, no longer have as much faith and belief in Synlait as what they did only a few weeks ago let alone the level of trust they had a couple years ago.
A lot have given notice to cease supplying, this whole “Independent board member directed option” to only involve A2 and Bright dairy is certainly pushing my fellow farmer to look elsewhere. If too many more suppliers are lost, then you haven’t got enough suppliers to preform and you don’t have a Dairy company. That Independent board member needs to be Sacked for their short sightedness.
I see that any which way A2 and Bright went about it they would have gotten their way. They have the numbers. Now I wonder if the process will cost them the supplier base and trying to woo them back at what cost?
Love to hear your thoughts.

You might want to thank the investment advisors for that one. But ultimately the buck stops at George Adams.

Bright might ultimately be hoisted by their own petard as you say. If suppliers leave (thats a huge risk) they might end up doing all their dough. That might also be a great case study further down the track.

[Marilyn Munroe]

It occurs to me the exclusion of retail investors from the capital raise may not be a manipulation by corporate finance drones, but the application of Xi Jinping's Common Prosperity policy where the dictatorship of the proletariat gets its exclusive hands on the output of labour to distribute according to socialist principals.

Having to class struggle with a turbulent bunch of capitalist and kulak minority shareholders from the Antipodes would get in the way of socialist planning.

Boop boop de do
Marilyn

[ralph]

It occurs to me the exclusion of retail investors from the capital raise may not be a manipulation by corporate finance drones, but the application of Xi Jinping's Common Prosperity policy where the dictatorship of the proletariat gets its exclusive hands on the output of labour to distribute according to socialist principals.

Having to class struggle with a turbulent bunch of capitalist and kulak minority shareholders from the Antipodes would get in the way of socialist planning.

Boop boop de do
Marilyn

I think as previously said the credit raise would have been snubbed by a lot of minority shareholders & this is the best outcome for synlaits future (& shareholders ) ,also having the largest shareholder being Bright & the major market being China it is going to bring more prosperity in the long run to this company that was savaged by A 2 to the detriment of most kiwis except A2 shareholders of course but time may tell & they may yet get
their comeuppance .
Either way Marilyn without the Chinese Market the whole Industry is screwed & the bigger their stake the more prone to favorability & market share etc

[Balance]

Many lessons to be learnt from near collapse of Synlait.

Good summary of where Synlait is at :

https://newsroom.co.nz/2024/09/13/sy...-of-the-woods/

“They can’t continue because of that level of debt, and effectively are in an insolvent situation,” said Dr Nic Lees, a senior lecturer in agribusiness management at Lincoln University who uses the company as a case study for students in his third-year strategic management course.