Under the terms of the proposed transaction, Beston will receive all milk from the farms, currently around 17m liters per annum, over a ten-year period. Aurora is expected to continue to grow production from these farms in the future.
The sale process for the farms was conducted through an international open tender process that commenced in January 2020 with final bids received on March 5, 2020.
The timing of final bids coincided with the introduction of travel and other restrictions due to the COVID-19 pandemic. This impacted on the due diligence processes for a number of bidders and slowed negotiations.
Beston said it has been able to manage its way through these issues as a result of the goodwill and understanding demonstrated by the short-listed bidders and has negotiated a binding sale agreement.
The transaction is not predicated on a leaseback arrangement as Beston had offered to the market but provides Beston with milk supply security from these farms for a period of 10 years, with an option to extend.
Staff currently employed by Beston Farms will be offered employment with Aurora, subject to normal recruitment screening processes.
The transaction achieves Beston’s strategic objectives of releasing capital for re-investment in higher returning dairy factory assets, whilst securing long-term milk supply from the farms.
The proceeds will allow the investment program at the dairy factories to continue and allow Beston to fast-track the delivery of increased margins and sustainable free cash flow, while positioning the company to drive other actions consistent with its five strategic imperatives announced at the 2019 AGM. The sale price of the dairy farms is above book value.
Read more: dairyreporter.com
