A CHINESE-LED consortium, Inner Mongolia Fuyuan Farming Co Ltd (Fuyuan), is set to take a majority (79 per cent) shareholding in Korumburra-based Burra Foods pending Foreign Investment Review Board (FIRB) approval.
Fuyuan is owned by a number of investors, with the largest shareholder being China Mengniu Dairy Co Ltd (Mengniu), a company listed on the Hong Kong Stock Exchange (HKEx) which manufactures and distributes dairy products throughout China.
Burra Foods founder Grant Crothers, who will continue in his role as CEO and managing director, said the change in shareholding came as the result of a 12-month strategic investment review to explore investment and growth strategies.
In an interview with ABC Radio, he said that Burra Foods had had “a number of suitors” but all the interest had been from off-shore companies, none from Australian companies.
He said that Burra Foods was “a very viable operation as it stands, but we need more capital to go the next step”.
Mr Crothers said Fuyuan’s interest in Burra Foods will see the Gippsland dairy processor gain unparalleled access to the world’s largest and fastest growing dairy market in addition to improved access to capital that will fund expansion projects.
“We now have a shareholder who has enormous insight, great reach into the Chinese market,” he said.
Existing shareholders including Mr Crothers and Japanese dairy distributor ITOCHU Corporation have maintained a combined 21 per cent interest in the company.
“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,” Mr Crothers said.
“We have always been about maximising value from the milk solids we collect and process and have taken a very cautious approach to China, appreciating the significant risks that come with the increasing opportunities available.
“There are only winners in this deal, as the new structure enhances the future for our loyal milk supply partners, provides ongoing employment for our dedicated staff, while ensuring increased and stable supply to our existing customers whether they are located in Australia, Japan, China or other parts of the world.”
The new structure is designed not to impact business operations, with the retention of the existing Burra Foods management team who are, said Mr Crothers, committed to honouring all customer supply agreements and continuing to deliver a premium to milk supply partners.
“We are nothing without our supply partners and customers and are now in an even stronger position to meet their current and future needs with a solid business model that improves access to markets, technology and capital,” Mr Crothers said.
“Over the 25 years of growing Burra Foods from a very modest base, we have worked hard to live by our values, one of which is ‘nobody is smarter than the market’ where we respond to the market’s needs.
“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.”
In the wake of the dramatic price drop at Murray Goulburn, Mr Crowther said his phone had been “running hot” with calls from MG suppliers looking to switch processors. He said he had limited capacity to take on new suppliers.
“We haven’t’ got that much headspace, but we have got some headspace for growth,” he said.
Both Burra Foods and Fuyuan will provide directors for a new board once FIRB approval is granted and the sale is completed.
“We are committed to exploring opportunities that will secure the future for employees, the local Korumburra community and the South Gippsland dairy industry,” Mr Crothers said, insisting that despite the changes the situation would continue to be “very much business as usual” at Burra Foods.