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IPO deepens New Zealand's economic ties with China

Nick Perry, Associated Press

WELLINGTON, New Zealand (AP) -- New Zealand's economic ties with China deepened Monday with plans for the first IPO of a Chinese company on the New Zealand stock market.

Dairy company Synlait Milk announced it plans a July listing in order to raise capital to expand its infant formula business. Synlait is majority owned by Chinese company Bright Dairy & Food Co.

China's thirst for New Zealand milk saw it overtake Australia this year as New Zealand's largest export market. And new travel figures released Monday show that Chinese tourism was up 30 percent in the year ending May. Some 221,000 Chinese tourists visited New Zealand during the year, second only behind the 1.2 million tourists from Australia, according to Statistics New Zealand.

Other New Zealand companies, including farm supplier PGG Wrightson and appliance maker Fisher & Paykel Appliances, have been bought by Chinese companies. But Synlait's listing would mark the first such initial public offering by a Chinese-owned company, according to New Zealand stock market spokeswoman Kate McLaughlin.

Bright doesn't plan to sell any of its Synlait shares but the IPO will dilute its stake from 51 percent to about 40 percent. A governance agreement would allow Bright to retain effective control of Synlait by appointing four of eight directors and retaining the ability to remove the managing director.

Synlait's listing on the NZX Main Board is expected to raise about 120 million New Zealand dollars ($93 million) and would value the company at between NZ$305 million and NZ$372 million.

John Penno, Synlait's co-founder and managing director, said New Zealand's dairy products are in great demand in China. He said he's not concerned about the potential for a slowing Chinese economy and said he sees plenty of upside in China for New Zealand's premium dairy products.

"China can't continue to grow the way it has and a slowdown is inevitably going to happen," he said. "But it's also becoming more urbanized, people have an improved quality of diet, and they realize the importance of these products for families and young children."

Bright, which is listed on Shanghai's stock exchange, bought its 51 percent stake in Synlait in 2010 for NZ$82 million.

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