Chinese infant formula manufacturer Feihe International plans to sell two of its dairy farms to Haerbin City Ruixinda Investment Co.

Feihe has said it will sell all of its equity interests in Heilongjiang Feihe Kedong Feedlots Co and Heilongjiang Feihe Gannan Feedlots Co for US$131.8m. The sale price comprises of $17.8m in cash and six equal quarterly deliveries of raw milk with a value of around $114m, Feihe said today (2 August).

As part of the deal, until Haerbin City has met its milk delivery obligations, it must supply raw milk to Feihe exclusively and then has to prioritise any of Feihe’s requirements for extra raw milk.

“We are extremely pleased to enter into the equity purchase agreement with Haerbin City Ruixinda Investment Co for the two world-class demonstration dairy farms,” said Feihe chairman and CEO Leng You Bin. “A professional company will operate the two dairy farms and we will be able to get the same premium quality dairy farm raw milk at an unlimited exclusive supply period.”

The Feihe chief said the transaction will allow the company to improve its liquidity and reduce its debt level, as well as eliminate dairy farm operating expenses.

“It will also allow us to focus on infant formula manufacturing and marketing in order to achieve our long-term leadership position within China’s infant formula industry,” he added.