By Lynda Kiernan

Inner Mongolia Fuyuan Farming has agreed to buy a 79% stake in Australian dairy company, Burra Foods for an undisclosed amount. The deal, however, is reported by the Australian Financial Review as setting a value of $300 million on the company.

The deal, which is subject to review by Australia’s Foreign Investment Review Board (FIRB) will provide Burra Foods with deep access to the Chinese market as well as capital to fund expansion projects. Under the terms of the deal, existing shareholders in Burra Foods, including its founder Grant Crothers and Japan’s ITOCHU Corp., will retain the remaining 21% in Burra with Mr. Crothers remaining in his role as Managing Directors and CEO.

Founded in 1991 in Korumburra, Burra Foods has grown to include 170 dairy farmer-suppliers to supply the raw milk for the production of milk powder, infant formula, and liquid milk.

Burra Foods founder, Mr. Crothers, told Hong Kong’s The Age that the transaction is “a low-risk approach into a very dynamic, competitive and volatile market that is China,” adding, that Burra’s suppliers would benefit in the form of “increased stability and a greater opportunity to reach into higher value markets.”

Amid an atmosphere of tension regarding Chinese acquisition of Australian agricultural assets, Australian dairy industry groups have come out in favor of the deal.

“What it shows us is that despite the current market volatility, the fundamentals of the industry are still strong,” Simone Jolliffe, president of Australian Dairy Farmers told The Age. “And it highlights that there’s still a long-term demand for clean, safe product from Australia.”

The Burra deal also comes close on the heels of an announcement made by Murray Goulburn, the country’s largest dairy processor, that it was cutting its milk prices, and represents a promising opportunity for a new market outlet for farmers that are terminating their contract with Murray Goulburn.

Mr. Crothers told ABC that although Burra didn’t have “that much headspace” for growth, it did have a limited ability to take on suppliers that have broken with Goulburn.