Federated Farmers is keeping a close watch on Synlait Milk Ltd.
The Canterbury-based company, which has a milk-processing plant between Rakaia and Dunsandel, announced on July 11 Dutch dairy giant FrieslandCampina had bought some of its shares.
FrieslandCampina Investments Holding B.V., a subsidiary of Royal FrieslandCampina, will hold about a 7.5% shareholding in Synlait Milk upon completion of the Initial Public Offering (IPO).
Federated Farmers dairy chairman Willy Leferink, a Fonterra supplier-shareholder and a contract milk supplier to Synlait, said the investment could shake up the New Zealand dairy industry.
Synlait Milk chairman Graeme Milne said FrieslandCampina's move was part of the bookbuild to institutional investors and NZX firms.
''Our working relationship with FrieslandCampina has developed over the years and they have become a valued customer.
''We view their investment as a positive endorsement of the growth opportunities we see for Synlait Milk in the coming years.''
On July 10, Synlait set a final price of $2.20 per ordinary share. That gave it a market capitalisation of approximately NZ$322 million on completion of the IPO.
Chinese company Bright Dairy and Food Co Ltd would hold about a 39.1% shareholding, with the Japanese Mitsui & Co Ltd and Mitsui & Co (Australia) Ltd together holding approximately 8.4%.
Mr Leferink said FrieslandCampina's monetary outlay was ''modest at around $24.15 million'', but sent a powerful message.
''As a co-operative, FrieslandCampina's revenues are similar to Fonterra's. You could describe the investment in Synlait as a 'toe-dipping' exercise but clearly there is an underlying desire to get exposure to New Zealand liquid milk.''
FrieslandCampina would be able to buy more Synlait shares in future if it wanted to, Mr Leferink said.
''Its cornerstone shareholding is to us more like a beachhead.''
He believed it was significant that the Dutch company would have a strong shareholding alongside the Chinese and Japanese ones: ''The prize is clearly Asia.
''While other investors have not meant much to Kiwi dairy farmers, FrieslandCampina most certainly will,'' Mr Leferink said.
''Having one of Europe's largest co-operatives enter our market, albeit through a commercial shareholding, may just spark a discussion over how the domestic co-operatives will respond - Fonterra especially.
''While the focus of the last Dairy Industry Restructuring Act review was on Fonterra's financial redemption risk, Federated Farmers was concerned at the potential for supplier loss.
''Fonterra's current model is that all suppliers, save for some, either have three seasons to `share-up' or go on to contract milk. Even with contract milk, you have to agree to share-up with Fonterra within six years.
''Sharing-up in Fonterra is currently done by buying those bank-unfriendly, highly-priced shares. To us, there has to be a change here. A modified `Friends of Fonterra' is how I put it in an opinion editorial.
''What is for certain, things have become very interesting in the dairy industry,'' Mr Leferink said.