Japfa to sell 5 percent stake in AustAsia to New Hope for US$58.4M

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Japfa has entered a deal to sell a 5 percent stake in subsidiary AustAsia Investment Holdings to Chinese agri-food group New Hope for US$58.4 million in a move to establish a partnership to enhance its position in China’s raw-milk production market, the agri-business said in a filing to SGX Tuesday.

The deal values AustAsia, which operates dairy farms producing raw milk and cattle feedlots producing beef in China, at US$1.17 billion, the filing said.

The proposed deal is part of Japfa’s strategy of adding milk processors as shareholders of AustAsia to increase its footprint, with a goal of becoming China’s largest independent raw-milk producer, the statement said, noting the company will still retain a 62.5 percent stake in AustAsia.

In July 2020, Meiji took a 25 percent stake in AustAsia, while in August 2021, agreements were announced for Genki Forest and Honest Dairy to acquire 5 percent and 2.5 percent stakes, respectively. The sale of an aggregate 12.5 percent AustAsia stake to New Hope, Genki Forest and Honest Dairy will raise total cash proceeds of US$146 million, Japfa said.

The proceeds will be used for general working capital and corporate purposes, Japfa said.

Agri-food company New Hope’s dairy division is a leading large-scale dairy supplier in China, operating a network of 12 dairy processing facilities across South West, East, North and Central China. New Hope is an existing customer of AustAsia.

The deal includes a milk-supply agreement which will provide AustAsia a revenue stream for providing milk to New Hope Dairy, the filing said, noting the contract is on a five-year rolling basis, renewed annually.

AustAsia has 10 dairy farms, which were designed to meet international standards on productivity and biosecurity and which had around 84,000 heads of cattle in its dairy herd, the filing said, adding two additional dairy farms were recently acquired in Shandong, with total capacity of around 16,000 heads of cattle.