The deal, to be unveiled today, creates the country’s first integrated “paddock to plate” dairy play, with the larger processors such as Bega and Warrnambool Cheese & Butter opting to buy from third-party farmers.
ADF is acquiring the business from the private equity-backed Aussie Farmers Direct, which has opted to dispose of its processing operations in favour of focusing on online-based distribution.
Located in the lush western district, Camperdown Dairy Company provides white label milk to Woolworths, marketed under the grocer’s Farmer’s Own brand. It is also developing an own-branded range of yoghurt, cheese and milk products.
ADF director Adrian Rowley said ADF planned to expand the capacity of CDC, which was running at only half its capacity of 36 million litres a year.
He said a key attraction was that CDC was only one of two dairies certified by Chinese authorities for rapid quarantine clearance of fresh milk.
The other licence, which allows for a seven-day turnaround from paddock to fridge, is held by Lismore-based food co-operative Norco.
“It’s not big volumes at the moment but that’s potentially a great market,’’ Mr Rowley said.
He said that as well as continuing to provide the Woolworths home brand, the deal should pave the way for CDC-branded products on the supermarket’s shelves.
ADF produced 15 million litres annually from five Victorian farms, with a target to increase this to 50 million litres.
The company in June raised about $18m to buy three properties, but with only two actually acquired, some of the funds will be channelled into the “opportunistic” CDC purchase.
“This opportunity came up and it’s just perfect,’’ he said. “The volumes are ideal for what we are producing.’’
Mr Rowley said it was hard for the large processors to own their own farms because 90 per cent of properties were still family-held. “To try to acquire land and farms would be a $1 billion investment for them,’’ he said. “There’s no one at the suitable end of the scale to put them together.’’
The deal is the latest in the dairy industry shake-out that kicked off with the heated three-way battle for Warrnambool Cheese & Butter in 2013.
This month the TasFoods consortium, which reverse-listed through the shell of payments company OnCard, was dramatically gazumped on a deal to buy Tasmania’s Van Diemen’s Land Company for $250m.
Despite the advocacy of prominent QC Allan Myers, Tasfoods failed in a Supreme Court challenge to halt the sale by VDLC’s New Zealand owners to Chinese billionaire Lu Xianfeng.
While VDLC intends to develop its own brands, its 100 million litres annual output is taken by trans-Tasman giant Fonterra under a contract that runs until 2023.
ADF shares today will resume trading, having been in a trading halt since last Wednesday. The shares last traded at 14.5c, ascribing a market valuation of $22m.
The purchase will be funded by existing cash and a debt facility.
