Fonterra is divesting selling three farms, of which two of which are being sold to Inner Mongolia Natural Dairy


Fonterra to sell its farms in China. (Credit: Pixabay/Mabel Amber.)

New-Zealand-based Fonterra Co-operative Group has agreed to sell its Chinese farms, which were developed with support from local partners, for NZ$555m ($369m).

Fonterra is selling two of its farming-hubs in Ying and Yutian for NZ$513m ($341m) to Inner Mongolia Natural Dairy, a subsidiary of China Youran Dairy Group.

Separately, it is also selling 85% of stake in its Hangu farm to Beijing Sanyuan Venture Capital, for NZ$42m ($28m). Beijing Sanyuan already holds 15% stake in the farm and has exercised its right to acquire the remaining stake.

Fonterra CEO Miles Hurrell said: “We’ve worked closely with local players, sharing our expertise in farming techniques and animal husbandry, and contributed to the growth of the industry.

“We don’t shy away from the fact that establishing farms from scratch in China has been challenging, but our team has successfully developed productive model farms, supplying high quality fresh milk to the local consumer market. It’s now time to pass the baton to Youran and Sanyuan to continue the development of these farms.”

The sale is expected to be completed within this financial year

The sale is subject to anti-trust clearance and other regulatory approvals in China and is expected to be closed within this financial year.

Through the sale of the farms, Fonterra can prioritise the areas of its business where it has competitive advantages.

As per the co-operative, through the sale of the farms it can prioritise the areas of its business where it has competitive advantages.

Hurrell continued saying: “For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the needs of the Co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk.

“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production. Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China.

“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R&D and application centres in China will support this direction.”

In January this year, the co-operative had completed the sale of its 50% stake in DFE Pharma to CVC Strategic Opportunities II.

The sale was announced last September and after securing regulatory approvals from competition authorities, it was completed.

Fonterra chief financial officer Marc Rivers stated that the sale was a key milestone in strengthening its balance sheet. The cash proceeds included NZ$554m ($368m), comprising original sale proceeds of NZ$537m ($356.7m) along with NZ$17m ($11.3m) in settlement adjustments.