Japfa to acquire two dairy farms for $165.7 million to strengthen foothold in China

SINGAPORE (THE BUSINESS TIMES) - Agri-food company Japfa, through its 75 per cent-owned subsidiary AustAsia Investment Holdings, has agreed to buy two dairy farms in Shandong, China, by acquiring Falcon Dairy Holdings, the group said on Monday (June 28).

AustAsia, which operates the group's dairy and beef farming businesses in China, will acquire the entire issued capital of Falcon for about US$123.4 million (S$165.7 million), the group said.

The closing of the transaction is expected to take place on or around June 30, 2021.

Japfa said the acquisition will enable it to take advantage of the favourable raw milk price environment due to the current supply shortage in the Chinese market, and also boost AustAsia's capacity and accelerate its expansion in China.

Falcon holds 100 per cent capital of Pure Source Farm Company, which owns the two dairy farms in Shandong province that produce raw milk.

The farms have a total capacity of about 16,000 heads of cattle, and will expand the group's production capacity in a shorter time compared with building new farms from scratch, Japfa said.

The group said that in addition to the two dairy farms, the transaction includes two additional sites of land in Shandong that can be further developed.

Japfa said the Pure Source farms located in Shandong province are in close proximity to AustAsia's Hub 1 farms, "with benefits from operational synergies and the sharing of infrastructure".

Mr Edgar Collins, head of dairy of Japfa and managing director of AustAsia, said that the acquisition is "a further step in (the group's) strategy to become the leading independent raw milk supplier in China".

Shares in Japfa closed at 83.5 cents on Friday, down 0.5 cent or 0.6 per cent.