Japfa, on Aug 30, has entered into two separate sale and purchase agreements (SPAs) to dispose of a 7.5% stake in its subsidiary AustAsia Investment Holdings for a total consideration of US$87.6 million ($117.9 million).
AustAsia operates dairy farms producing raw milk and cattle feedlots producing beef in China.
The SPAs were entered into with Plutus Taurus Technology HK, a subsidiary of Genki Forest Technology Group Holdings and Honest Dairy Group.
Under the SPA, Genki Forest, through Plutus Taurus Technology, has purchased 16.8 million shares, or 5.0% of the total issued shares in AustAsia, while Honest Dairy Group has purchased 8.4 million shares, representing 2.5% of the shares in AustAsia.
The total consideration implies a 100% equity value of US$1.17 billion for AustAsia.
In addition, Genki Forest and Honest Dairy have entered into a contract with subsidiaries of AustAsia to provide for the supply of raw milk to both companies on a five-year rolling basis. The contract is renewable annually.
As both Genki Forest and Honest Dairy are growing food and beverage Chinese companies and existing customers of AustAsia, the SPAs will allow AustAsia to forge strategic partnerships as part of its plans to grow into the largest independent raw milk producer in China.
The milk supply agreements will also provide a revenue stream for the AustAsia group.
See also: Japfa reports 2.7 times growth in FY20 earnings of US$322.0 mil
In July 2020, Japfa sold a 25% stake in AustAsia to Japanese dairy giant Meiji for US$254.4 million.
Following the completion of the proposed transactions, Japfa will remain AustAsia’s single largest and controlling shareholder with a 67.5% stake.
The sale and purchase of the shares by Genki is expected to take place around 15 business days after the announcement. Meanwhile, the sale and purchase of the shares by Honest Dairy will take place around three business days following the announcement.
“We are pleased to welcome Genki Forest and Honest Dairy as new strategic partners at this exciting time for AustAsia. We have been building AustAsia to become the leading independent raw milk producer in China by championing our industrialised business model for milk production and our strong dairy farming expertise, with the consistently highest milk yields in China,” says Japfa CEO Tan Yong Nang.
“Today we believe that AustAsia will benefit from the addition of two Chinese strategic partners who share our growth ambitions in China and our focus on quality. Together with all our partners, we expect to further enhance AustAsia’s position in the dynamic Chinese dairy market and create long term value,” he adds.
Credit Suisse (Singapore) acted as the financial advisor to Japfa for the transaction.
Shares in Japfa closed 1 cent lower or 1.46% down at 67.5 cents on Aug 30.
Photo: Japfa's website
