August 2, 2011

Feihe International Inc, formerly known as American Dairy, said Monday (Aug 1) that it plans to sell its two dairy farms in China to a Chinese investment company to cut debt and eliminate farm operating costs.

The investment firm, Haerbin City Ruixinda Investment Company Ltd, will pay about US$18 million in cash for the two farms. It will also supply Feihe with milk for the next year and a half, which Feihe estimates will be worth about US$114 million. Ruixinda Investment will also be banned from selling milk to other companies before supplying Feihe's milk.

Besides being part of the cost-reduction plan, Feihe's CEO Leng You Bin said the sale would also allow Feihe to focus on selling infant formula. Feihe sells infant formula and powdered milk in China.

Feihe International has an office in the Los Angeles area but does business in China through its subsidiary, Feihe Dairy, headquartered in Beijing. The company changed its name in October to reflect its "exclusive focus" on the Chinese market.