Japan’s Meiji has agreed to acquire a 25% stake in Japfa’s Chinese dairy business, AustAsia Investment Holdings, for $254.4 million as it aims to expand its presence in the Chinese dairy industry.
The purchase follows Meiji’s establishment of Meiji Dairies (Tianjin), a China-based company that will produce and sell Meiji’s milk and yogurt products in China.
Both the acquisition and new company form part of Meiji’s 2026 vision business plan in which it aims to establish growth overseas with the Chinese market as its priority.
Currently in China, Meiji is engaged in the milk and yogurt business, as well as ice cream and confectionery and has reportedly witnessed steady expansion due to the growing popularity for chilled milk and the rise of health-conscious consumers.
Japfa’s AustAsia operates seven farms in China with roughly 80,000 cows and is a major supplier of raw milk to Meiji’s dairy business.
Meiji believes the deal will strengthen its value chain from raw milk procurement to finished products operation and will help establish a sustainable growth base in China.
“This…partnership will secure the supply of quality raw milk for Meiji’s downstream operations and provide a stable revenue stream for Japfa,” said Japfa CEO Tan Yong Nang, as cited by Reuters.
Singapore-based agri-food company Japfa also has dairy operations in Indonesia and specialises in producing protein staples and packaged food.
According to Reuters, Japfa intends to use proceeds from the deal to repay a $253 million term loan facility, thus improving its leverage ratio and balance sheet.
The deal is is expected to be completed by July 2020. Following the completion of the acquisition, AustAsia is expected to become an equity-method affiliate of Meiji.
© FoodBev Media Ltd 2020