Lactanz Dairies, Western Australia’s largest milk producer, was recently purchased for close to A$30 million (US$22.5 million) by a group of European investors. In the words of neighboring dairy farmer Ross Woodhouse to ABC News, the sale was, “a long time coming.” After accruing debts of A$21 million under previous ownership by New Zealand-based Rosmerta, Lactanz has been in receivership since 2013. More information on the identities of the current buyers has not been disclosed at this stage.
The 2200 hectare operation consists of four farms in Scott River East, located in the southwest region of Western Australia. Currently, its 4,500 dairy cows supply Parlamat-owned milk processor Harvey Fresh with 15-20 million liters of milk yearly. While plans for altering this relationship have not been announced, it is rumored that the new owners are looking to ramp up production, with the aim to export long-life milk.
Local dairy producer Woodhouse would go on to tell ABC News that the buyers’ commitment, “shows someone can see a long-term future in our industry,” adding that, “this area presents a very good opportunity, and geographically, Western Australia will capitalize on future markets in Asia.”
Given its proximity to large, rapidly growing Asian markets, the Australian dairy sector has increasingly been the target of a large amount of M&A activity. In 2015, GAI News tracked nearly $1.5 billion of capital flowing into the Australian dairy sector, primarily through means of foreign investment. These deals included plans for a $750 million rollup of 66 dairy farms by Aerem, along with the $100 million acquisition of Moxey Farms by a three-way consortium of Chinese and Australian investors.
The importance to the Chinese economy of overseas investment in this sector was denoted by China’s Vice Premier Wang Yang at the August 2015 China D20 dairy summit, where he encouraged top dairy companies to go abroad to acquire dairy resources in order to meet growing demand in China. New Zealand and Australia, competitive due to location, a well-established industry, and newly established free trade agreements will continue to be attractive destinations for Chinese and foreign dairy investment.
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Eric Francucci