SINGAPORE (Dec 22): Agri-food company Japfa has entered into a share purchase agreement to acquire 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 (AIH) and AIH2 (AIH2). The subsidiaries owns the group’s dairy business comprising dairy farms in China and Indonesia, as well as its “Greenfields” milk downstream business.

Japfa currently holds a 61.9% and 64.4% stake in AIH and AIH2 respectively, while Black River Funds owns the remaining interest.

Under the proposed transaction which is subject to shareholders' approval at an EGM to be held on or about April 12, Japfa will acquire Black River Funds’ 38.1% stake in AIH and 35.6% stake in AIH2 for an aggregate consideration of US$263.1 million ($353.7 million).

This comprises 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.

In a Wednesday night filing, Japfa says 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," says the group.

Japfa says AustAsia in China commands leadership position in terms of raw milk yields, while in Indonesia, its enjoys strong brand equity with Greenfields as the top fresh milk brand. With its upstream milk business substantially in place, the group will now focus on strengthening its downstream capabilities.

In addition, with AustAsia as a wholly-owned subsidiary, the group will enjoy full contribution from its dairy business which has recorded consistent profitability, despite the prevailing low raw milk price environment, adds Japfa.

The acquisition will be funded by bank borrowings. The company will enter into a facility agreement for an up to $280 million underwritten and committed syndicated loan with DBS Bank and Coöperatieve Rabobank U.A., Singapore Branch.

Shares in Japfa closed 1 cent higher at 48 cents.