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Industry Happenings


December 26, 2017


Japfa to acquire remaining interest in dairy business for US$263.1 million

 
 
Japfa Ltd. announced that it has entered into a share purchase agreement to acquire the outstanding shares in AustAsia from Black River Funds which is managed by Proterra Investment Partners LP.

 

AustAsia consists of the company's two principal subsidiaries - AustAsia Investment Holdings (AIH) Pte. Ltd. and AIH2 Pte Ltd. These subsidiaries own the group's dairy business comprising dairy farms in China and Indonesia, as well as its Greenfields milk downstream business.

 

Japfa currently holds a 61.9% and 64.4% stake in AIH and AIH2 respectively, while Black River Funds owns the remaining interest.

 

Under the proposed transaction, the company will acquire Black River Funds' 38.1% stake in AIH and 35.6% stake in AIH2 for an aggregate consideration of US$263.1 million, comprising call option shares of US$19.6 million (based on the cost of investment of Black River Funds) and sale shares of US$243.5 million, which was arrived at, after arm's length negotiations on a "willing-buyer, willing-seller" basis taking into account AustAsia's earnings and dairy industry earnings multiples.

 

The acquisition will bolster the Japfa's overall profile. Gaining full control over its dairy business, which has been a strong engine of growth, will enable the group to align AustAsia's objectives with its long-term strategic goal of becoming a fully integrated milk and food player in emerging markets.

 

In China, AustAsia commands leadership position in terms of raw milk yields, while in Indonesia, its enjoys strong brand equity with Greenfields as the top fresh milk brand. With its upstream milk business substantially in place, the group will now focus on strengthening its downstream capabilities.

 

In addition, with AustAsia as a wholly-owned subsidiary, Japfa will enjoy full contribution from its dairy business which has recorded consistent profitability, despite the prevailing low raw milk price environment.

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