The strategic partnership will allow Japfa to boost its growth in Chinese dairy industry
Meiji has agreed to purchase minority stake in Japfa’s Chinese dairy unit. (Credit: Gerd Altmann from Pixabay)
Singapore’s agri-food firm Japfa has agreed to divest a 25% stake in Chinese firm AustAsia Investment Holdings to Meiji in a deal valued at around $254.4m.
AustAsia manages the dairy farming business of Japfa in China. The strategic partnership is expected to help Japfa to boost its growth in the Chinese dairy industry.
AustAsia is a major producer of premium raw milk in China
AustAsia, a major producer of premium raw milk in China, had a herd size of around 80,000 heads of cattle as of 31 December 2019.
The company has five modern dairy farms in Dongying, Shandong, as well as two farms in Chifeng, Inner Mongolia.
The deal will allow Japfa to combine its expertise in dairy farming and quality raw milk production with Meiji’s processing and distribution resources to improve the company’s position as a leading raw milk producer in China.
The deal is subject to the satisfaction of conditions, including Japfa’s shareholders’ approval. Japfa will use proceeds from the deal to repay its term loan of $253m.
Upon completion of the deal, Japfa will hold a 75% stake in AustAsia, and will continue to oversee AustAsia’s farming operations in the country.
Japfa CEO Tan Yong Nang said: “We have been supplying raw milk to Meiji for many years and we are pleased that they have approached us to support their growth plans in China and reinforce our strategic relationship.
“Their interest in holding a significant stake in our dairy business is a testament to the quality of our raw milk, the reliability of supply and our advanced farm management techniques.”
Meiji is a Japanese dairy company that conducts operations in milk, yogurt and cheese categories. In China, the company manages the milk and yogurt business, as well as the ice cream and confectionery business.
Japfa is engaged in the production of protein staples, including poultry, swine, aquaculture, beef, dairy and protein-based consumer products.
In December 2019, The Asian Development Bank (ADB) agreed to provide $7.5m loan to Milko, a dairy company in Mongolia, to support the company’s dairy expansion plans.
Source: Company Press Release