Business-to-business supplier Burra Foods set for Chinese control

Business-to-business supplier Burra Foods set for Chinese control

Chinese dairy farming company Inner Mongolia Fuyuan Farming Co Ltd - which is part owned by dairy giant Mengniu - plans to take a "majority shareholding" in Australia's Burra Foods.

Burra said the agreement would enable it to execute plans to improve market access, as well as raise capital to expand its dairy processing facility in Korumburra, Victoria.

"Fuyuan's interest in Burra Foods will see the local 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," the Australian group said in a statement.

Burra's existing shareholders, founder Grant Crothers and Japanese dairy distributor Itochu Corp, will hold 21% of the company's share capital following the completion of the deal. Crothers will continue in his role as managing director and CEO.

Crothers said the tie-up will mitigate some of the risks of expanding in the high-growth Chinese dairy market. "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," he suggested.

"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 transaction is pending approval from Australia's Foreign Investment Review Board.

Fuyuan is owned by a number of investors with the largest shareholder being Mengniu, which manufactures and distributes dairy products throughout China. Burra produces dairy ingredients for the global food manufacturing market. According to its website, the group specialises in delivering "the functional and sensory characteristics of fresh milk". Products include cheese, fresh milk concentrates, food preparations, speciality milk powders and fresh dairy ingredients.

Burra processes around 300m litres of milk annually at its manufacturing plant in Korumburra, in south eastern Victoria. The company operates sales offices in Melbourne, Hong Kong and Tokyo.

Reports that Mengniu was interested in taking a stake in Burra first emerged late last month