Fuyuan acquires Australian dairy company pending FIRB review

Inner Mongolia Fuyuan Farming Company (Fuyuan) has acquired a 79 percent stake in Australian dairy ingredient processor Burra Foods for an undisclosed sum.

The company will expand its dairy processing facility in Korumburra, Victoria, while the change in ownership will give better access to China’s growing consumer market, according to a statement. Hong Kong Stock Exchange-traded China Menigniu Dairy is the largest shareholder in Fuyuan.

The deal must be approved by Australia’s Foreign Investment Review Board (FIRB), like any deal of more than A$55 million in the agribusiness sector.

“This injection of capital provides us the scope to meet the ongoing market demand for premium dairy-based ingredient products, including nutritional milk powders, and move up the value chain while minimising the risks associated with penetrating volatile international markets with high value products,” said Burra chief executive Grant Crothers in the statement.

“The new shareholder structure will provide Burra Foods with vastly improved access to new high value milk and nutritional powder markets, facilitating low risk growth up the value chain, and access to additional capital,” said Crothers.

He will remain in his post along with the rest of the existing management team.

Earlier this month, Treasurer Scott Morrison rejected the proposed acquisition of S Kidman, Australia’s largest private land holding, by a Chinese-led consortium following a FIRB review. Agricultural land investments, where the FIRB reviews any deal of A$15 million or more, face particularly strong scrutiny. Burra, however, focuses on processing milk from its producers, rather than cattle stations.

Australian government officials emphasised the tighter restrictions are not meant to exclude foreign investment from the country’s agriculture.

“Foreign investment has underpinned the development of our nation and we must continue to attract the strong inflows of foreign capital that our economy requires,” wrote Morrison in his rejection of the Kidman deal. “We will continue to welcome and support foreign investment that is not contrary to our national interest.”