If approved Dairyworks will operate as a stand-alone business under the Synlait umbrella, with its chief executive Tim Carter reporting to Synlait chief executive Leon Clement.
“The acquisition allows us to get closer to consumers, a key part of our long-term strategy,” Synlait said.
Synlait says it has sufficient bank facilities to fund the acquisition and, given it is subject to OIO approval, payment is not expected until sometime in the first quarter of 2020.
The price represents about 7.5 times earnings before interest, tax, depreciation and amortisation based on the last year’s earnings.
“This business is a great strategic fit for us and an important step in growing our presence in the everyday dairy category,” Clement said.
“Opportunities exist in both businesses to streamline supply chains and enhance our competitiveness. It gives us the ability to optimise how we process milksolids and get the most value from our supply of milk.”
Dairyworks is based in Hornby, Christchurch, about 37 kilometres from Synlait’s Dunsandel site.
It specialises in processing, packaging and marketing dairy products including cheese, butter, ice cream and milk powder.
It markets its products across New Zealand’s two supermarket groups and has a growing relationship with Australian firm Woolworths, which owns New Zealand’s Countdown chain. It also has strategic customers in the food service, quick service restaurants and export channels.
According to Synlait, it supplies nearly half of NZ’s cheese and a quarter of its butter. It has a 9% market share in ice cream and a 19% share in milk powder. Its brands include Dairyworks, Rolling Meadow and Alpine.
The purchase complements the $37.8m purchase of cheese manufacturer Talbot Forest Cheese, which it completed on August 1.
Dairyworks has 240 staff and will take Synlait’s total headcount to about 1200.
Synlait shares last traded at $9.71 and have lifted 7.9% so far this year. – BusinessDesk