Fonterra Shareholders’ Fund (ASX: FSF) has announced that it’s selling its China farms for $555 million.
Fonterra is one of the largest dairy businesses in Australia and New Zealand.
Fonterra’s farm sale
Fonterra has agreed to sell the farms after developing them with its local partners.
It’s selling its two farming hubs in Ying and Yutian for $513 million to Inner Mongolia Natural Dairy Co.
Fonterra is also going to sell its 85% stake of its Hangu farm to Beijing Sanyuan Venture Capital Co for $42 million, which already owns a 15% stake.
The sale will allow Fonterra to focus on areas of the business where it believes it has competitive advantages.
Fonterra CEO Miles Hurrell said: “We’ve worked closely with local players, sharing our expertise in farming techniques and animal husbandry, and contributed to the growth of the industry.
“For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the need of the co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk.
“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production. Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China.
“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R&D and application centres in China will support this direction.”
Summary
This seems like a good move. I’m not sure if it was a great price or not, but it’s probably better to focus on New Zealand operations.
But there are other ASX growth shares, based in New Zealand, I’d rather buy like Pushpay Holdings Ltd (ASX: PPH) and A2 Milk Company Ltd (ASX: A2M).