Fonterra, a New Zealand-based international dairy co-operative, has reportedly announced that it would sell its farms In China for a total sum of $555 million to a subsidiary of the China Youran Dairy Group, Inner Mongolia Natural Dairy Company.
Additionally, the company also stated that it intends to sell its majority stake of 85% in Hangu farm for $42 million to Beijing Sanyuan Capital Co., which presently holds a minority stake of 15% in the farm and has already used its right of first refusal to buy the New Zealand based company’s interest.
The company plans to use the proceeds from the two sales to clear some of its debts, as a part of its overall debt reduction plan, which it had announced a while ago.
Miles Hurrell, the CEO of Fonterra stated that the company had proved its commitment to the expansion of the Chinese dairy market through building the farms. The firm has worked alongside regional industry players, effectively sharing its expertise in animal husbandry and farming techniques, contributing to the expansion of the regional industry.
Hurrell further added, Fonterra has been reviewing its business for the past 18 months in an effort to ensure that its investments and assets fulfill the current co-op needs. Selling the farms in China falls in line with the company’s decision to concentrate its focus towards its New Zealand farmers’ milk.
The company has invested approximately $1 billion over the past 10 years towards the development of its China farms. In 2019, the firm stated that it will write down the valuation of numerous businesses in New Zealand, Australia, Venezuela, Brazil, and China between $820 million - $860 million, which also included over $200 million in association with the China farms.
The co-operative still considers China among its most crucial strategic markets, receiving approximately 25% of its production. The China farms sale would help the company essentially focus more at consolidating its Consumer Brands, Ingredients, and Foodservice businesses across China.