SML - Synlait Milk Ltd

[Bikeguy]

What is to stop Bright simply increasing its position significantly through a CR, which A2 is going to have to participate in or lose its blocking stake, then Bright simply keeps this business afloat and switches its A2 infant formula to supply the likes of Neatle? I believe the average Chinese consumer ( or any consumer) has the intelligence to quickly work out that it’s say the same product made by the same supplier in a different tin? And as Nestle are a very powerful entity in their own right I can imagine their marketing and ability to put it into the market at an attractive price point is very real…
I am invested in both companies, but let’s be real, A2 effectively controls very little, that was proved with Covid, and what’s going on between these two is either a jack up so they can both increase their ownership at our expense or it’s a real relationship breakdown alongside a balance sheet that needs deleveraged, nothing which businessmen at this level should not be able to resolve,
Either way time for some professional from both sides, unless like I suspect it’s the first option…

[Ggcc]

That is an unlikely outcome for a simple reason: Bright Dairy spent ca. $200 m for its 39% shareholding, and none of its directors dares to sell its shares to anyone at a huge loss. ATM cannot buy out individual shareholders only.

Bright Dairy will want a deal as for the directors they might be happy walking with some money rather than a receivership notice. Of course unless they have a plan that gets them out of that. ATM will negotiate if it is beneficial to the company, maybe Bright Dairy gets a percentage in ATM

[Toddy]

What is to stop Bright simply increasing its position significantly through a CR, which A2 is going to have to participate in or lose its blocking stake, then Bright simply keeps this business afloat and switches its A2 infant formula to supply the likes of Neatle? I believe the average Chinese consumer ( or any consumer) has the intelligence to quickly work out that it’s say the same product made by the same supplier in a different tin? And as Nestle are a very powerful entity in their own right I can imagine their marketing and ability to put it into the market at an attractive price point is very real…
I am invested in both companies, but let’s be real, A2 effectively controls very little, that was proved with Covid, and what’s going on between these two is either a jack up so they can both increase their ownership at our expense or it’s a real relationship breakdown alongside a balance sheet that needs deleveraged, nothing which businessmen at this level should not be able to resolve,
Either way time for some professional from both sides, unless like I suspect it’s the first option…

Bikeguy

Is your investment recent?
If not, I'm trying to understand why shareholders have not exited this investment a long time ago and invested capital in a more transparent Company.

[Bikeguy]

Bikeguy

Is your investment recent?
If not, I'm trying to understand why shareholders have not exited this investment a long time ago and invested capital in a more transparent Company.

I wish Toddy, no I’m sitting at $2.25 break even point…simply did not see such a breakdown in this relationship, (if that’s what it is)
The financials would have been bumpy but with both of these companies working together it seemed a fair risk if one was willing to play the long game…
Now I’m in on both sides regardless lol

[billkiapi]

Good question Toddy, in my case investment is small and was out of interest really. Bright can't just wipe the debt so any CR will be hugely diluted to pay off some 500M of debt. The question is why Bright would do that- they are not a white knight here, they have been on the board during a massive loss of value driven by a stupid argument with their biggest customer. A2M are not fools, and they have cash. My bet is that A2M end up with Dunsandel, which is not what Synlait wants, but I don't see another way for banks to get their debt back. Then shareholders can class action the Synlait company and directors for the various profit downgrades when they must have known there was a problem in the A2M relationship much earlier than was announced.

[Toddy]

I'm not doubting there is a punt opportunity for those that come on board now.

If there was one thing that I have learnt over the years is that you need to be disciplined about implementing a 'stop loss' to your investment strategy.

Like riding Le Tour De France. It's not about fisnishing first in a stage but more about not losing time.

[Bikeguy]

I'm not doubting there is a punt opportunity for those that come on board now.

If there was one thing that I have learnt over the years is that you need to be disciplined about implementing a 'stop loss' to your investment strategy.

Like riding Le Tour De France. It's not about fisnishing first in a stage but more about not losing time.

Have to say well said, and I agree with you on all points made.