Synlait Milk is bidding to buy rival South Canterbury dairy company New Zealand Dairies after yesterday announcing the purchase of Oceania Dairy, which has abandoned plans to build a plant at Glenavy, on the Waitaki Plains.
Operations manager John Roberts confirmed yesterday Synlait was bidding to buy New Zealand Dairies (NZDL), which operates a five-tonne-an-hour milk drier plant near Waimate and is being sold by its Russian owners Nutritek.
Synlait's purchase of Oceania included supply contracts with 30 farmers on the Waitaki Plains, some of whom were suppliers to NZDL but were in the process of switching to Oceania.
The two dairy companies announced the sale yesterday, with Oceania chief executive Paul Park saying that after two years trying, it was unable to raise capital to build the Glenavy factory in time for the 2011-12 season.
It had 30 dairy farmers contracted to supply it with milk for the coming season but no factory.
The deal has Synlait, which is at Dunsandel, in Canterbury, paying an undisclosed sum for all the assets of Oceania including resource consents and land purchase options for land at Glenavy, supply agreements with 30 farmers and the Oceania name and brand.
''Basically all the Oceania package - they're acquiring it all,'' Mr Park said.
Synlait operation's manager John Roberts said it was looking for milk to fill an $88 million expansion of its Dunsandel site, due to be commissioned in September this year, and the Oceania suppliers would increase the volume handled 10%-15%.
But he also confirmed Synlait was in the race to buy NZDL's factory at Studholme.
''It is one of our activities,'' he said.
''We are in the mix. It is a process under way and it still has a month until it is completed.''
Synlait was expanding its Studholme factory, which would double its capacity to more than three million litres a day, but building the Glenavy factory remained an option.
Mr Roberts said it would wait to see how milk flows grew during the three-year term of supply agreements with the
Waitaki farmers before deciding whether it would build the Glenavy plant.
''It will give us time to get the factory full and then decide on our next step.''
The outcome of its bid to buy NZDL would be included in the mix.
Synlait and Oceania met with the Waitaki farmers on Monday night where Mr Roberts said they explained their plans and vision.
Mr Park said the suppliers were surprised by the news, as many thought the Oceania plan was dead.
''Overall, the view was pretty positive and they seem happy that they have the option of preserving the agreement that was there,'' he said.
None had withdrawn their milk so far and Mr Roberts said the reception was positive.
Synlait collects milk from 105 farmers within a 35km radius of its Dunsandel plant and intends using the same transport operator to cart milk north from South Canterbury and North Otago, a distance of about 130km.
Synlait Milk is a partnership between Synlait Ltd and Bright Dairies of China, which last July invested $82 million for a 51% stake in the company.
The deal provided Synlait with cash to expand the factory and access to markets and distribution networks in China.
