New Zealand-based a2 Milk Company (a2MC) has initiated negotiations to acquire a 75.1% stake in Mataura Valley Milk (MVM), a dairy nutrition business, for NZ$270m ($177m).

As a part of this initiative, a2MC made a non-binding indicative offer to acquire a stake in the dairy nutrition business.

A2MC CEO Geoff Babidge said: “As previously announced, due to the increasing scale of our infant nutrition business, we have been assessing participation in manufacturing capacity and capability.

“The potential investment in Mataura Valley Milk’s recently commissioned facility, alongside China Animal Husbandry Group, aligns with this strategic objective as we look to complement and build upon our current strategic relationships with Synlait Milk and Fonterra Co-operative Group, which remain in place.

“Our intention would be to invest further to establish blending and canning capacity at Mataura’s facility to support the establishment of a fully integrated manufacturing plant for infant nutrition.”

A2MC noted that the offer was part of talks carried out with MVM to participate in manufacturing at MVM’s facility in Southland, New Zealand.

According to the proposed terms, China Animal Husbandry Group (CAHG), the major stakeholder of MVM, would retain a 24.9% stake in MVM.

CAHG is a subsidiary of China National Agriculture Development Group, the parent company of CSFA Holdings Shanghai, which is a2MC’s strategic partner in China.

MVM has agreed to provide a2MC a period of exclusivity for conducting confirmatory due diligence and negotiate definitive transaction documentation.

a2MC added that it is continuing its discussions with MVM and the deal is yet not finalised.

If successful, the company will fund the deal through its existing cash reserves.

In March, a2 Milk entered into an exclusive licensing agreement with Agrifoods Cooperative to extend its brand into the Canadian market.