Synlait CEO Resignation Highlights Deeper Challenges Facing Dairy Processor
A revolving door of chief executives at milk processor Synlait is a warning sign, says Lincon University senior lecturer in agribusiness Nic Lees.
Of the total votes cast, 99.59% supported a resolution to approve the loan with 0.41% against. Bright Dairy, which owns 39% of Synlait, did not get to vote. Turnout was 48% of total issued capital.
Synlait will fully draw the loan to meet the $130 million payment due to its banks on July 15.
The listed company’s board had warned if the $130 million payment is not made and the banks do not agree to alternative arrangements, Synlait will need to cease trading or initiate a formal insolvency process.
Until this morning, Synlait was in discussions with its second largest shareholder- a2 Milk Company, which owns a 19% stake on supporting the resolution.
In an announcement on the New Zealand Stock Exchange this morning, a2MC said it would back the resolution.
However, in the announcement a2MC also sounded a warning about the state of Synlait’s affair.
“As advised by Synlait in the notice of meeting, a2MC and Synlait have been in discussions. Those discussions relate to Synlait’s broader recapitalisation plan, which includes the shareholder loan as well as Synlait’s proposed equity raising and concurrent refinancing of its bank facilities, and various other matters. a2MC continues to have concerns and will engage in discussions with Synlait in the coming weeks.”
Synlait chair George Adams thanked shareholders for their support.
“The shareholder loan resolution was very important to Synlait’s future and completed the first step in
resetting Synlait’s balance sheet,” says Adams.
“We look forward to providing you with further updates as the board progresses its plans for an equity capital raising. Synlait’s core Advanced Nutrition and Foodservice businesses have enormous growth potential, and we are committed to delivering on that for your benefit."
On behalf of Bright Dairy appointed directors, Julia Zhu also acknowledged the shareholder vote in support of the board’s turnaround actions underway to restrengthen Synlait’s financial position.
“There is a stronger, healthier future for the business coming and Bright Dairy is deeply committed to ensuring the Synlait’s long-term success for all shareholders and its farmer suppliers.”
Synlait’s share price, which had slumped to 22c in recent weeks, bounced back today to around 37c.
