Cornerstone shareholding in a third New Zealand dairy company is headed overseas with news yesterday Singapore-based Olam International is to buy 24.99% of Dairy Trust for $101 million.
It intends upping its stake to 30%.
Dairy Trust has also announced a takeover bid for the 47.6% of Waikato dairy company Open Country Cheese (OCC) that it does not own, offering $2.75 a share, a 31% premium on the last trading price of $2.10 a share.
Olam has agreed to sell Dairy Trust its 19.9% OCC stake.
In a statement announcing its new shareholding, Olam said it was entitled to two seats on the board of Dairy Trust and intended increasing its stake to 30%, subject to obtaining Overseas Investment Office approval.
Olam would be Dairy Trust's second largest shareholder behind Affco, which has 35.5%, and ahead of Talley Group which owns 17%.
But tightly held shares could stymie plans to increase its stake, with six shareholders owning 88.5 million of the 93 million shares on issue.
A specialist supply-chain manager of agricultural products and food ingredients, Olam is one of Singapore's 40 largest companies with turnover of $4 billion, employing over 8000 staff and operating in 56 countries.
This overseas interest in Dairy Trust follows Russian company Nutritek Overseas Ltd initially buying 24.5% of South Canterbury-based New Zealand Dairies.
It has since bought the Studholme business outright.
Japan's Mitsui Corporation has a 14% stake in Canterbury dairy company Synlait.
In addition to a majority stake in Open Country Cheese (OCC), Dairy Trust is in the final stages of building a dairy factory at Awarua, south of Invercargill which will start operating next month.
Capacity at OCC has been doubled ahead of the new dairy season.
Additional plants would be built in the next two years in Wanganui and Northland.
Dairy Trust chief executive Mark Fankhauser said in an interview that Olam bought to Dairy Trust knowledge of managing risk, managing rapidly growing companies and sales and marketing.
"We've got experience on the board around industry structure, farming, procuring milk and getting it processed.
What we needed are those other two things - sales and marketing."
The investment was not a sign Dairy Trust was about to challenge Fonterra's dominant position.
Rather, Mr Fankhauser said, Dairy Trust intended being a niche player which pursued organic growth from increased milk flows.
Foreign ownership was not a prerequisite for new dairy companies, said Mr Fankhauser, as Fonterra was also seeking outside capital.
"We are a small company which is 99% dedicated to export and to attract this sort of wisdom beyond New Zealand's shores is a sensible business decision."
This coming season Dairy Trust, including OCC, would process 450 million litres of milk and export 70,000 tonnes of dairy products, generating revenue of $400 million and an expected $13 million net profit after tax.
Olam's managing director of coffee and dairy products, Vivek Verma, said in a statement the company was drawn to New Zealand by its low cost of production, medium-term milk growth of 3%, New Zealand's dominance in generating 26% of world dairy trade and proximity to Asia.
He said Olam intended to become a global leader in the dairy business in the next few years.
