A lack of investor interest has forced Canterbury milk processor Synlait Milk to defer its initial public offer (IPO), by which it hoped to raise $150 million.
The money was to be used to build a second drier at its Dunsandel factory, but the company said "the overall level of support was insufficient to proceed at this time".
"Synlait remains committed to executing its plans and will continue to consider a future IPO and the alternative proposals centred on private placements that have been negotiated in parallel."
Sources yesterday confirmed media reports that 23% shareholder Mitsui Corporation had an exit clause that it could enforce if Synlait Milk did publicly list.
Mitsui had a policy of not being a passive investor in listed entities, and the issue was to have been dealt with in the IPO prospectus, the source said.
Its stake was acquired several years ago through a mix of shares and loans to Synlait.
Craigs Investment Partners broker Chris Timms was surprised Synlait had withdrawn the offer, but said investors could have been hurt by the poor performance of publicly listed New Zealand Farming Systems Uruguay.
But other than dairy farmers, investors had few opportunities to invest in our largest export industry, Mr Timms said, with no New Zealand-based dairy company publicly listed on the New Zealand Stock Exchange.
"I was surprised they didn't get sufficient support from a country built on the agricultural sector."
Mr Timms said Craigs looked at the offer and believed it had generated interest from investors, but he questioned whether Synlait would bother with an IPO, saying it might focus on sourcing funds privately.
Synlait is made up of three entities, Synlait Ltd, Synlait Milk and Synlait Farms, which collectively reported a loss of $42 million in the past financial year.
Sources say the result was accrued over different accounting periods for the three entities and the IPO was only related to Synlait Milk, the company's milk-processing arm.
Synlait commissioned its first milk drier earlier this year but has milk contracts which will increase production to 300 million litres in the next year, taking production close to capacity.
A new drier would almost double the size of the factory, allowing it to handle 550 million litres of milk a year by 2011.
