Japfa completes China dairy unit stake sale to Meiji for US$254.4m

AGRI-FOOD company Japfa on Friday closed the sale of a 25 per cent stake in AustAsia Investment Holdings, which operates the group's dairy farming business in China, to Japan's Meiji.

As part of the agreement, Japfa will continue to manage the farming operations in China, which will supply raw milk to Meiji under a five-year rolling contract, renewable annually.

Japfa has received US$254.4 million in total cash consideration, and used that to pay down its US$253 million syndicated loan. The repayment of the term loan will thus improve the group's consolidated leverage ratio and strengthen its balance sheet, it said.

The completion of the deal follows approval granted by shareholders and the satisfaction of conditions precedent, the mainboard-listed company announced in a bourse filing last Friday.

Japfa continues to own a 75 per cent stake in AustAsia, one of the leading independent producers of premium raw milk.

Japfa already supplies raw milk to Meiji for its downstream operations in China, where Meiji is active in the milk and yogurt business as well as the ice cream and confectionery business.

Tan Yong Nang, Japfa chief executive, said the Japanese group's strategic partnership with the Singapore firm combines Japfa's expertise in dairy farming and raw milk production with Meiji's processing operations and well-recognised brand in dairy products.

"This strategic partnership also enables us to build AustAsia to become the largest independent raw milk producer in China and creates value for shareholders," he added.

Japfa shares fell one Singapore cent or 1.5 per cent to close at 66.5 cents on Friday, before the announcement.