January 16, 2008
Agfeed acquires majority stakes in five hog farms in Jiangxi
AgFeed Industries, Inc. (FEED) announced that it has acquired majority interests ranging from 55 to 100 percent in five hog farms located in China's Jiangxi province in a deal worth US$5.3 million.
AgFeed assumed majority ownership of each of the hog farms with the original owners maintaining minority stakes and staying on as operational management.
Including its existing Lushan breeder hog farm, which was acquired in November 2007, AgFeed expects to achieve total production of approximately 120,000 hogs for 2008 from these six hog farms.
AgFeed is a fast-growing premix animal nutrition and hog producer in China, with 380 franchise stores in the nation. It recently acquired the largest hog farm in Jiangxi and is aggressively looking to acquire more hog farms since it entered the hog raising industry last year.
The latest acquisitions were completed with the company's available corporate funds.
AgFeed acquired the interests in the hog farms for an aggregate of approximately US$5.3 million, with US$1.06 million paid at closing and the remainder payable in two installments due in February and March 2008.
AgFeed will lease the underlying facilities from the original owners under 10-year lease agreements which call for AgFeed to pay the original owners rent of RMB 35 RMB (US$4.75) per hog sold in exchange for use of the facilities.
Songyan Li, Ph.D., Chairman of AgFeed said the latest move is part of the company's growth strategy of developing its hog raising business and quickly expanding production capacity to achieve economies-of-scale through strategic acquisitions.
Junhong Xiong, AgFeed's CEO said AgFeed is in a strong position to complete additional hog farm acquisitions as it has been supplying many farms premix hog feed over the last decade and has thus developed a high level of trust among commercial hog farm owners.
AgFeed is a US public company listed on the NASDAQ Global Market.