Dairy giant Beston Global Food Company has sold its four South East dairy farms to Canadian Government fund Aurora Dairies for $40.4 million, on a walk in-walk out basis.
The South Australia-based produce, meat and dairy company put the farms on the market in January through an international tender process on "buy and lease back" terms, and in a bid to reduce its bank debt and reset its balance sheet.
Under the agreement, Beston will receive all milk from the farms, which currently produce around 17 million litres per year, for a 10-year period with the option to extend.
Beston Chairman, Roger Sexton, said the company is no longer reliant on owning farms.
"The sale of our dairy farms is an important milestone which continues our journey toward a streamlined, cash-generating company… [and] comes at a good time for the business, as we work through the other side of the restrictions brought on by COVID-19," Dr Sexton said.
"The farms allowed us to secure milk supply during our start-up phase [but] Beston is no longer reliant on owning them due to our long-term milk supply contracts with independent farmers."
Share price up 40 per cent
The four farms include Kurleah at Allendale East, purchased by Beston for $7.23 million; Weneeda at Kalangadoo bought for $4.26 million and the congregation of Pedra Branca at Mount Gambier, sold to Beston in 2015 for $19.2 million.
The farms cover around 15 square kilometres of high rainfall country, with a dairy cow herd of 3,687 including dairy replacements.
Aurora Dairies CEO, Ben James, said the "high quality farms" will expand the fund's operations in Southern Australia, following its acquisition of 11 Warakirri dairy farms last year.
It currently manages 18 dairies in Victoria and South East South Australia, producing around 100 million litres of milk annually.
Proceeds from the sale will allow Beston to focus on the strategic expansion of its mozzarella and dairy nutraceuticals production lines including lactoferrin; a high-value dairy protein used in infant formula.
At mid-morning, shares in Beston Global Food Company (ASX: BFC) were trading nearly 40 per cent higher at $0.075.
The transaction is subject to approval from the Foreign Investment Review Board and if relevant approvals and conditions are satisfied, the company expects to complete the transaction by the end of September.
