By The Edge Singapore
Atiqah Mokhtar Published on Mon, Jun 28, 2021
Agri-food company Japfa has announced that its dairy division is acquiring two farms in Shandong, China.
Japfa’s 75%-owned subsidiary AusAsia Investment Holdings will acquire the entire issued capital for Falcon Dairy Holdings for US$123.4 million ($165.5 million). Falcon holds 100% interest in Pure Source Farm Company, which in turn owns the two dairy farms.
The farms produce raw milk, with a total capacity of approximately 16,000 heads of cattle.In a press release on June 28, Japfa says the acquisition will enable quicker expansion of AustAsia’s production capacity, allowing it to take advantage of the “favourable raw milk price environment” given the current supply shortage in the Chinese market.
“We are pleased with the acquisition of the Pure Source farms, which is a further step in our strategy to become the leading independent raw milk supplier in China. The strategically located, state-of-the-art dairy farms provide us further production capacity of quality raw milk in good time, significantly reducing the expansion capacity lead time compared to building new farms from scratch,” says Edgar Collins, head of dairy of Japfa and managing director of AustAsia.
“Pure Source farms are the right fit for us, sharing the same commitment to quality farm design, operational efficiency, and best farm practices. We welcome the Pure Source farms team to AustAsia and look forward to working together to further develop the Pure Source farms and grow our position in China,” he adds.
As of Dec 31, 2020, AustAsia had a dairy herd size of approximately 84,000 heads of cattle across five farms in Shandong and three farms in Inner Mongolia. The Pure Source farms are located in close proximity with AustAsia’s Shandong farms, which the company says will allow for benefits from operational synergies and the sharing of infrastructure.
In addition to the two established dairy farms, the transaction also includes two additional sites of land in Shandong that potentially can be further developed.
The transaction is expected to close by June 30. Shares in Japfa closed down 0.5 cents or 0.6% lower at 83.5 cents on June 25.