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Japfa to acquire remaining interest in dairy business for US$263m

MAINBOARD-LISTED Japfa Ltd is intending to acquire the remaining interest in its dairy business through the purchase of 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 Pte Ltd (AIH) and AIH2 Pte Ltd - that own the group's dairy business comprising dairy farms in China and Indonesia, as well as its Greenfields milk downstream business.

In a Singapore Exchange filing on Thursday, Japfa said that it currently holds a 61.9 per cent and 64.4 per cent stake in AIH and AIH2 respectively, while Black River Funds owns the remaining interest.

Under the proposed acquisition, the company will acquire Black River Funds' 38.1 per cent stake in AIH and 35.6 per cent 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 took into account AustAsia's earnings and dairy industry earnings multiples.

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The acquisition will be funded by bank borrowings.

Japfa said that the acquisition will bolster the group'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.

"With its upstream milk business substantially in place, the group will now focus on strengthening its downstream capabilities," it said.

For the proposed deal, the company will seek shareholders' approval at an extraordinary general meeting to be held on or around Apr 12, 2018, following the conclusion of the company's annual general meeting.

Japfa closed one Singapore cent higher at S$0.485 on Thursday.