AustAsia Group (HKEX: 02425) has announced that on July 21, 2026, its wholly-owned subsidiary, Shanghai Aoya Food Co., Ltd. (the Buyer), entered into a conditional sale and purchase agreement with Meiji (China) Investment Co., Ltd. (the Seller).
Under this agreement, the Seller conditionally agrees to sell, and the Buyer conditionally agrees to purchase, all of the equity (the Sale Shares) in a to-be-established wholly-owned subsidiary of the Seller in China (the Target Company).
The acquisition is for the Target Business, which includes the Seller's dairy sales operations conducted through transferred assets, reassigned employees, and transferred contracts, as well as the dairy production business of the Target Company's subsidiary. The consideration consists of a base purchase price of RMB 320 million plus an adjustment amount, with a total cap of RMB 350 million.
A prerequisite for the acquisition is the Seller's completion of a pre-completion restructuring. This involves incorporating the Target Company, transferring the relevant assets, the target subsidiary, and reassigned employees to it, and transferring or renewing the pertinent contracts.
Upon completion of this restructuring, the Target Company will operate the business previously managed by the Seller. Following the transaction's close, the Target Company will become a wholly-owned subsidiary of AustAsia Group, and its financial performance, assets, and liabilities will be consolidated into the Group's financial statements.
The Board views this acquisition as a strategic opportunity for the Group to expand its operations beyond raw milk production and strengthen its position across the entire dairy value chain. The Target Group's dairy manufacturing business represents a natural downstream extension of the Group's raw milk production capabilities.
Post-acquisition, the Group will be able to integrate its operations in milk procurement, processing, and sales, enabling a greater proportion of its self-produced raw milk to be processed through the Target Group's manufacturing facilities.
The acquisition is expected to enhance visibility into demand for the Group's raw milk, thereby reducing reliance on third-party customers for sales and mitigating risks associated with raw milk price volatility and cyclical market fluctuations.
The deal will provide the Group with established dairy manufacturing facilities, including existing capacity, equipment, and technical expertise. As the Target Group currently has underutilized processing capacity, the Group plans to introduce its existing business volume post-transaction to improve capacity utilization.
This move is anticipated to dilute fixed costs, enhance production efficiency, improve supply chain synergies, and bolster overall cost competitiveness.
The acquisition will grant the Group access to the Target Group's established customer relationships and distribution network in China. By leveraging the Target Group's existing B2B and B2C channels, the Group expects to broaden its market reach and solidify its market position across a wider customer base.
The transaction is also projected to diversify the Group's revenue streams, expand its customer portfolio, and lower customer concentration risk. Furthermore, the broader sales and distribution network is expected to increase the stability and resilience of the Group's revenue and cash flow.
The acquisition will enable the Group to leverage the Target Group's existing brand recognition, customer relationships, and market influence within China's dairy market. The Board believes this established market presence can aid in customer retention and support the Group's future business expansion and market penetration efforts following the transaction's completion.
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