Wattle Health Australia, an infant-formula and baby-food business, has sold the assets of what proved to be a troublesome joint venture to South Korean dairy firm Maeil Dairies Co.
Sydney-listed Wattle Health formed Corio Bay Dairy Group in 2018 with Organic Dairy Farmers of Australia and Niche Dairy, with each of those parties holding 45%, 50% and 5% of the venture respectively. Wattle Health invested the majority of the cash with AUD63m (US$49m today) in the form of interest-bearing loans, while Niche contributed AUD7m.
A key project within the venture was to build an organic milk spray drying facility in Geelong in the state of Victoria on land adjacent to Organic Dairy’s existing processing operations to be run by Corio Bay. It is still under construction. The dried milk produced by Corio Bay was to be sold under the True Organic brand under a licensing agreement with Organic Dairy.
However, Organic Dairy went into voluntary administration last year, citing trading difficulties in China, with its stake taken over by Shepparton Partners Collective in return for shares in Wattle Health.
In turn, Corio Bay experienced financial difficulties linked to the disruption from Covid-19, while Wattle Health itself reported an annual loss last year, partly attributable to Corio Bay.
Maeil Dairies has now made a binding offer for the Corio Bay assets through its subsidiary Maeil Dairies Australia for AUD13.5m and will finalise the construction of the spray dryer facility.
Wattle Health said in a filing with the Australian Securities Exchange the proposed disposal of Corio Bay would allow the company to be “fully funded, build its core business and look for further opportunities”.
At the same time, the baby-food maker has signed a letter of intent with Maeil “to provide supply and technical expertise for us in Wattle Health’s nutritional dairy range”.
Executive director George Karafotias said: “With the sale of Corio Bay and a major restructuring in 2020, Wattle will now be fully funded and able to focus all its efforts and resources on further increasing distribution of the company’s exciting product range and identifying new opportunities to bring to market.”
Maeil Dairies manufactures lines including milk, yogurt and cheese. It has seven factories in South Korea and markets products under brands including Maeil and Double Up. The company is also the importer in South Korea for brands such as Arla Foods’ Lurpak and Ferrero’s Ferrero Rocher. The group has an export business, selling dairy products in markets such as China, Saudi Arabia, the US and Canada.