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Fonterra says it will sell farms it has developed with local partners in China for $ 555 million (RMB2.5 billion).
Fonterra’s two agricultural centers in Ying and Yutian will be sold to Inner Mongolia Natural Dairy Co, a subsidiary of China Youran Diary Group for $ 513 million, and in a separate deal it will sell 85% of its stake in a farm in Hangu to Beijing. . Sanyuan Venture Capital co for 42 million dollars.
Sanyuan, which owns a 15 percent minority stake in the stock, exercised its right of first refusal to buy Fonterra’s shares.
The asset valuation was revised down after undergoing a strategic review, in which the dairy cooperative obtained “additional information and more insight,” Fonterra CEO Miles Hurrell said.
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Fonterra chief executive Miles Hurrell says that by building the farms, Fonterra has demonstrated its commitment to developing the Chinese dairy industry.
By building the farms, the dairy giant has demonstrated its commitment to developing the Chinese dairy industry, he said.
“We have worked closely with local stakeholders, sharing our experience in farming and livestock techniques, and we contribute to the growth of the industry.
“We do not shy away from the fact that establishing farms from scratch in China has been a challenge, but our team has successfully developed productive model farms, supplying fresh, high-quality milk to the local consumer market. Now is the time to pass the baton to Youran and Sanyuan to continue the development of these farms. “
The sale of the farms would allow Fonterra to prioritize its competitive advantage in other areas of the business, he said.
The cooperative had been reviewing its business for the past 18 months to make sure its assets and investments met its current needs. The sales coincided with its decision to focus on its New Zealand milk, it said.
China remained one of its most important markets, absorbing about a quarter of its production.
“Selling the farms will allow us to focus even more on strengthening our foodservice, consumer brand and ingredient businesses in China.
“We will do this by bringing the benefits of New Zealand milk to Chinese customers in innovative ways and by continuing to partner with local Chinese companies to do so. Our investment in research and development and application centers in China will support this direction, ”said Hurrell.
The sale would be subject to antitrust clearance and regulatory approvals in China, and was expected to be competed within the current financial year.
The value of the transaction is subject to customary purchase price adjustments and exchange rate movements, and gains or losses on the sale are normalized upon completion of the sale.
Fonterra hopes to use the proceeds to pay off debt as part of its overall debt reduction program, Hurrell said.
