December 17, 2010

Tianli acquires Hengdian hog farm in Wuhan city

Chinese producer of breeder and market hogs Tianli Agritech Inc, has agreed to purchase Hengdian Farm, a 20,000-head hog farm owned by Wuhan Taida Breeding Co Ltd in Wuhan city.

The agreement calls for payment of approximately US$1.4-$1.6 million to the seller upon the transfer of equipment. The company expects to close the transaction by the end of December 2010.

"We are very excited about this acquisition, which will become our 10th farm," said Tianli's Chairwoman and CEO, Hanying Li. The company has acquired and integrated multiple farms over the past four years.

"We will populate the farm with high-quality breeding stock expected to arrive in February, enabling the initial production to be brought to market in the fourth quarter of 2011.

"Once it reaches full operating capacity in 2012, the farm will generate annual revenue of approximately US$4.5 million at current market prices, with a targeted operating margin of approximately US$1.8 million," said Li.

Tianli will acquire the rights to 462 acres of land, 30 buildings and a variety of associated equipment. The company plans to invest approximately US$500,000 to upgrade the farm's facilities and transfer its breeding stock to the Hengdian Farm.

"We expect our ninth farm, which we completed the construction in summer of 2010 and is currently selling breeder hogs, will reach its full annual hog production capacity of 20,000 by next summer.

"Including the 20,000 production capacity we expect from the Hengdian Farm, our total annual hog production capacity would increase by approximately 36% to 150,000 hogs," Li added.

"We continue to actively pursue additional asset purchases like Hengdian, which we anticipate will generate a very attractive return on invested capital, resulting in a short payback period," Li said.

Wuhan city-based Tianli Agritech Inc is in the business of breeding, raising and selling hogs for breeding and meat purposes. The company also conducts genetic, breeding and nutrition research to steadily improve its production capabilities.