Japfa to sell 80% of Greenfields Dairy Singapore to TPG, Northstar for US$236m

Singapore

AGRI-FOOD company Japfa will sell 80 per cent of its South-east Asia-branded dairy business to affiliates of private equity firms TPG and Northstar Group for US$236 million in a strategic partnership, it said in an exchange filing early Monday morning.

Japfa will retain 20 per cent of the shareholding in Greenfields Dairy Singapore (GDS), which is the holding company of Japfa's Greenfields dairy business. It will continue to support TPG and Northstar in the management of the business.

Based on the consideration, the implied equity valuation of the GDS group is US$295 million, around four times the net asset value of US$81.3 million as at Sept 30, 2020.

Japfa expects to receive approximately US$244 million in cash following the proposed transaction, comprising cash proceeds of US$236 million from the transaction, and US$8 million from the repayment of a shareholder loan by GDS.

Japfa intends to utilise approximately US$150 million from the proceeds to declare and pay an interim special dividend of S$0.10 per share to its shareholders following completion. It said further details on the dividend, if declared, will be announced only after completion.

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The balance will be used for the payment of transaction expenses, the repayment of existing bank loans, and general working capital and corporate purposes.

The Greenfields dairy business is a vertically integrated business from dairy farming to branded dairy products in South-east Asia. GDS has subsidiaries in Indonesia, Malaysia and Hong Kong.

With a herd size of over 16,000 Holstein and Jersey cattle, Japfa's dairy farm operations are the largest in Indonesia by volume of premium fresh milk produced. It sells a range of dairy products including fresh milk, yogurts, UHT milk and premium cheeses under the Greenfields brand.

Tan Yong Nang, chief executive officer of Japfa, said: "The group's dairy business has grown considerably in recent years, both in China and South-east Asia, and there is potential for further growth.

"We are pleased to form this strategic partnership with TPG and Northstar to accelerate the next phase of development in South-east Asia through their strong track record of developing consumer and retail businesses," he added.

With the proposed transaction, Japfa's senior management will be able to focus on its "fast-expanding" China dairy business, as well as its other two core business pillars, namely poultry in Indonesia and swine in Vietnam, Japfa said.

TPG is a global investment firm with around US$85 billion in assets under management. Northstar is a private equity firm in South-east Asia, headquartered in Singapore; it manages more than US$2.2 billion in committed equity capital.

David Tan, managing director of TPG Capital Asia, said: "This is the third recent investment for TPG in the dairy sector, and we are delighted to do another investment in Indonesia. We strongly believe that the Greenfields brand and product quality will allow it to continue to grow in consumer appeal."

Sunata Tjiterosampurno, co-chief investment officer of the Northstar Group, said: "We believe the trend of increasing consumption of dairy products will continue in South-east Asia, as people become ever more focused on health and wellness."

The proposed transaction is conditional upon shareholder approval, and the consent of existing bank lenders. Completion is expected to take place in February next year.

Rangi Management, a controlling shareholder holding more than half of the issued shares of Japfa, has undertaken to vote in favour of the proposed transaction.

Credit Suisse (Singapore) is the exclusive financial adviser to Japfa Ltd for the transaction.

Japfa shares closed at 80.5 Singapore cents on Monday, up 3.5 cents or 4.5 per cent.