Synlait chair George Adams has described the outcome of the special shareholders meeting as “a watershed vote for Synlait”.
“There was no option, there really weren’t any Plan Bs, the reality is this has saved [the company from] liquidation,” Synlait chair George Adams said.
“We have been extremely clear that should the resolutions not pass, Synlait would likely need to cease trading and initiate a formal insolvency process.
“We were also clear the board did not believe that insolvency was the best option or the best way to ensure creditors are paid and returns are delivered to shareholders.”
The three resolutions put to shareholders at its special shareholders’ meeting at Dunsandel on Wednesday 18 September passed, all with more than 90% approval.
“Shareholders have given us the opportunity to create a positive future for the company, its investors, 200 farmers, customers, suppliers and for our 1400 employees whose livelihoods rely on our business.”
To reduce Synlait’s debt, shareholders were asked to vote on the issuance of approximately $217.8 million of new equity capital to the company’s two largest shareholders, Bright Dairy Holding Limited (Bright Dairy) and The a2 Milk Company, as well as Synlait’s settlement with The a2 Milk Company.
Shareholders were also asked to vote on certain administrative amendments to Synlait’s constitution.
The equity raise is conditional on the refinancing of Synlait’s bank facilities and certain other conditions.
Synlait entered definitive documentation to implement the refinancing of its banking facilities on September 16.
The equity raise, the settlement with The a2 Milk Company, and the bank refinancing are all inter-conditional and therefore must all occur contemporaneously, or substantially contemporaneously with each other, or not at all, Adams said.
Completion of all three components is expected on October 1, subject to the final conditions precedent to the equity raise and refinancing being satisfied.
Bright Dairy-appointed director Julia Zhu acknowledged the strong Synlait shareholder vote of support for the company’s initial step to address its current debt position.
“Our commitment throughout this process has been to protect the long-term value of Synlait and our decision to participate further reflects the scale of our ambition to ensure Synlait rebuilds stronger, while restoring farmer supplier confidence over coming years.
“We will continue to advocate that all shareholders are afforded the opportunity to participate in the company’s next capital management initiative.
“As Synlait’s broader turnaround initiatives start to gather momentum, Bright Dairy looks forward to actively supporting growth initiatives across major Asian markets where the long-term fundamentals for Synlait’s product remain strong,” Zhu said.
Adams did not necessarily consider Synlait out of the woods.
“Today is the first step to re-set our financial position,” he said.
In its favour, he said, Synlait has world-class facilities with exceptional capability in quality and innovation.
“Synlait can deliver products that other New Zealand companies cannot. It is the largest infant milk formula manufacturer in the southern hemisphere, that is why it has committed to global customers.
“In addition, at Pōkeno we now have a facility that can produce advanced nutritional products incorporating plant-based ingredients.
“We remain focused on expanding our early life and adult nutrition in China and throughout southeast Asia alongside the expansion of our Foodservice UHT cream business.
“In the shorter term we have a strong commitment to cost control and bedding in new operational processes with The a2 Milk Company.
“This all makes Synlait a company worth saving.”
Adams said the Dunsandel facility will remain the focus for dairy operations.
He said the immediate action is to talk to farmers about cease notices.
Shareholder and dairy farmer supplier Willy Lefrink was happy with the result.
“It is the outcome I wanted to see for farmers, for a lot of staff, and for Canterbury as a whole; it is a positive step going forward,” he said.
“It would have been disastrous if the vote had gone any other way, it’s onwards and upwards from here.”
Shareholder and former Synlait director Ruth Richardson said the Synlait DNA has always been at the premium end of the product.
“Today is a substantial vote of confidence and will help turn the promise of the company into performance and the more the whole of the sector can focus on the premium end the more prosperous NZ will become,” Richardson said.
With respect to Synlait’s listed subordinated bonds (SML010), the company reminded holders that following the passing of the three resolutions, subject to completion of the equity raise taking place as anticipated, a change-of-control event will occur in relation to the bonds and holders will have the right to redeem their bonds early from October 1, 2024.
The redemption price is expected to be $1.00 per bond (plus accrued interest) if the trading price continues to be less than $1.00.
