WELLINGTON, July 20 (Reuters) - New Zealand dairy processor a2 Milk Company Ltd rejected a takeover approach on Monday, but said it was considering other potential suitors as foreign firms circle dairy assets in the world's largest milk exporting country.
Shares in a2 Milk, which has a market capitalisation of about $323 million, slumped to a three-week low after it said it had told Australia's Freedom Foods and U.S. food giant Dean Foods that its offer for the company was it was not in the interest of the firm or its shareholders.
"The Board does not consider that the proposal in the Expression of Interest is compelling, and accordingly the Board would not be in a position to recommend it to shareholders," the company said in a statement, referring to the offer made in June.
Shares in a2 fell as much as 9 percent to NZ$0.70, their weakest since late June, as the niche processor said a takeover offer was not imminent even though it was evaluating other enquiries of interest.
The company, a small player in New Zealand's dairy industry, produces liquid milk and milk formula containing a protein which some drinkers consider to be easier to digest than regular milk, It exports to China, Australia, the United States and Britain.
The focus on specialised products has so far insulated a2 from a slump in global dairy prices, which has slashed earnings at other processors and led to job cuts at Fonterra, the world's largest dairy exporter.
Separately, the company raised its 2016 revenue forecast to NZ$267 million from NZ$230 million due to growth in infant formula sales in New Zealand, Australia and China, and said its recent expansion into the United States would also boost sales.
Offshore companies have been buying dairy assets in New Zealand in anticipation that an expanding middle-class in China and other emerging countries will boost long-term demand for dairy products, despite a slump in buying in the past year.
The approach for a2 came after France's Danone Sa last year picked up a milk formula processing plant and a packing factory run by small domestic operators, while Chinese dairy companies have been building milk formula plants in New Zealand, where dairy exports totalled $9.6 billion last year.
($1 = 1.5354 New Zealand dollars) (Reporting by Naomi Tajitsu; Editing by Richard Pullin)