A Synlait milk truck.
Photo: Synlait/supplied
Shareholders in embattled dairy company Synlait Milk have voted overwhelmingly to approve a range of measures to restore its finances and save the company.
A special meeting has approved a $218 million issue of new shares to its two largest shareholders and a $450m finance package from a consortium of banks.
The future of the debt-laden infant formula maker was hanging in the balance and needed shareholder approval to avoid the company likely going into insolvency.
Chair George Adams said a ‘no’ vote would have sunk the company that “was worth saving”, but saddled with debt totalling $565m.
“To be clear, the board does not believe insolvency is the best option for Synlait or that creditors are paid and returns are delivered to shareholders,” Adams told the meeting.
The new finance has come from Synlait’s two biggest shareholders – China-based Bright Food, and infant formula exporter a2 Milk, neither of which could vote on issuing shares to themselves, but could and did vote to issue shares to the other.
Other small shareholders were not asked to buy new shares, and the rescue package will result in their stakes in the company being diluted, a result the NZ Shareholders’ Association was not pleased with.
Asked by the association whether small shareholders would be included in any future capital raising, Adams said the need for another raising was not “imminent”.
Bright Dairy sees bright future
However, Bright Dairy director Julia Zhu told the meeting it supported all shareholders being involved in any future raising, which would likely be needed at some stage in the future.
She said Bright had done everything to support Synlait, which she described as a great company.
“Our shareholding rising to just over 65 percent shows we are doing the right thing at the right time by Synlait and to help protect all of our assets and investment in it.”
Synlait makes infant formula for a2 Milk, which exports it to China, but was hit by a downturn in the China market, supply chain disruptions caused by Covid, and a costly and unprofitable expansion of manufacturing into the North Island.
A last minute objection to the rescue package and an alternative plant to sell assets from Synlait founder and former chief executive John Penno came to nothing.