Aurora Dairies, the PSP Investments-backed Australian dairy operation managed by Warakirri Asset Management, has acquired four dairy farms in South Australia for A$40.4 million ($27.7 million; €24.6 million).
The seller – Beston Global Food Company, which is listed on the Australian Securities Exchange – has signed a contract to receive 100 percent of milk production from the farms for a 10-year period. This amounts to around 17 million liters of milk per year.
Beston advertised the properties for sale via an open tender process beginning in January, initially looking for a sale-and-leaseback arrangement. Under the deal, Aurora Dairies will take full ownership of the farms with no leaseback agreement and Beston will take the farms’ full milk production.
The transaction is expected to close by September 2020 and Aurora said that it expects to grow production at the four farms, which are located in the Mount Gambier region of South Australia.
Announcing the sale to shareholders this week, Beston said it would use the proceeds of the sale to reduce debt and fund production increases in its mozzarella and lactoferrin operations.
It said the transaction “achieves Beston’s strategic objectives of releasing capital for re-investment in higher-returning dairy factory assets, whilst securing long-term milk supply from the farms.”
Final bids for the farms were received on March 5, during the coronavirus pandemic, which Beston said had slowed down the due diligence process and negotiations with bidders.
Aurora Dairies is backed by Canada’s PSP Investments and is managed by Warakirri Asset Management.
It was established in February 2019 following the acquisitions of 11 dairy farms from Warakirri Dairies, with PSP retaining Warakirri to operate the assets.
It currently manages 18 dairy farms in Victoria and south-east South Australia, with a forecast annualized milk production of 100 million liters.
Warakirri also manages another joint venture with PSP in the cropping sector, called Daybreak Cropping.
Aurora Dairies chief executive Ben James said in a statement: “We are very pleased to have secured these high-quality farms and increase our portfolio weighting to a very good dairy region. We look forward to building a strong commercial relationship with Beston over the coming years.”