Japfa to sell equity stakes in China dairy unit for US$87.6m

AGRI-FOOD company Japfa on Monday announced it was planning to sell 5 per cent and 2.5 per cent equity stakes in its China subsidiary AustAsia Investment Holdings to Genki Forest and Honest Dairy for US$58.4 million and US$29.2 million in cash, respectively.

According to the group's regulatory bourse filing, the total US$87.6 million consideration implies a 100 per cent equity value of US$1.17 billion for AustAsia, which operates the Japfa's dairy farming business in China.

The group highlighted health tech beverage company Genki Forest and probiotic yoghurt producer Honest Dairy as "growing food and beverage Chinese companies". Both are existing customers of AustAsia with strong potential for future growth, it said.

The transaction is in line with the group's strategy of diversifying AustAsia's shareholder base with strategic investors while maintaining its independence and management control, it added.

Some 25 per cent of Japfa's equity in AustAsia was divested to Japanese conglomerate Meiji for US$254.4 million in July 2020.

Following its latest equity stake sales to Genki Forest and Honest Dairy, Japfa will own a remaining 67.5 per cent of AustAsia, which will continue to have control over the management of the group's farming operations in China.

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The group intends to use proceeds from the upcoming transaction to finance general working capital and corporate purposes.

"Today we believe that AustAsia will benefit from the addition of two Chinese strategic partners who share our growth ambitions in China and our focus on quality. Together with all our partners, we expect to further enhance AustAsia's position in the dynamic Chinese dairy market and create long term value," said Japfa chief executive Tan Yong Nang.

Shares of mainboard-listed Japfa ended Monday one Singapore cent or 1.5 per cent lower at 67.5 cents, before the announcement.

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