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A2 Milk Becomes Takeover Target, Shares Soar

A2 Milk Becomes Takeover Target, Shares Soar
Jun 22, 2015 By Imran Valibhoy

The A2 Milk Company (ASX: A2M) has announced that two confidential parties have shown associated interest in the potential acquisition of all the shares in A2 Milk. Shares of A2M have soared nearly 14% at 12:45pm (AEST).

A2 Milk is a New Zealand based company dual listed on the ASX and the NZX (NZX: ATM) and specialises in the production and distribution of A2 milk, cream, yogurt and infant formula to New Zealand, Australia, the United Kingdom, China and the US. The company owns intellectual property that enables the identification of cattle for the production of A2 brand milk.

Cow’s milk in most of the western world contains both A1 and A2 beta-casein proteins. Several thousand years ago all cows only produced milk that was absent of A1 beta-casein proteins. It is believed that during the move of cattle into Western Europe and their use of western farming practices, a potential genetic mutation occurred causing herds to produce the A1 protein. Studies have indicated that people who experience discomfort from drinking milk containing A1, have not experienced the same discomforts when consuming only A2 milk. The A2 Milk Company identified cows that produce only the A2 protein and subsequently produced and distributed a range of associated dairy products containing only the A2 protein and currently captures 9.3 per cent of the Australian fresh milk market.

The acquiring parties have demanded confidentiality and stated that their expression of interest is non-binding. In the event of the companies’ names becoming public, the expression of interest will be withdrawn. The deal is currently subject to a due diligence and approval from the New Zealand Overseas Investment Act. Currently A2’s biggest shareholder is Australian based Freedom Foods (ASX:FNP) at 19.14 per cent after increasing their position earlier this month. Shares of FNP have soared following the announcement and are currently trading at $3.14, up 12% from Friday's closing price.

The A2 Milk Company is currently trading on the ASX at 59 cents, up 15.7% following the announcement.

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Imran Valibhoy Author: Imran Valibhoy Jun 22, 2015

Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.

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