- Beston Global Food Company (BFC) has announced the sale of its dairy farms to Aurora Dairies has received Foreign Investment Review Board (FIRB) approval
- This approval was necessary due to Aurora being funded by the Canadian Pension Fund
- Last month, Beston agreed to sell its dairy farms in Mount Gambier to Aurora for $40.4 million
- The company wants to strengthen its balance sheet, reduce debt and focus on greater production of mozzarella and lactoferrin
- However, Beston isn't walking away with nothing and has secured 17 million litres per annum of milk supply for 10 years
- Additionally, it has secured 24 million litres of milk from Aurora's other farms within the region
- To complement its growth strategies, Beston recently raised a $1.2 million share purchase plan and $10 institutional placement
- Company shares closed 2.27 higher today, to trade for 9 cents
Beston Global Food Company (BFC) has announced the sale of its dairy farms to Aurora Dairies has received Foreign Investment Review Board (FIRB) approval.
Beston has also advised its share purchase plan closed on July 24 and raise roughly $1.2 million.
Dairy farms sale
In early June this year, Beston entered an agreement with Aurora Dairies for the sale of its dairy farms in Mount Gambier.
Under the sale, Beston would take away $40.4 million in cash to focus on growth opportunities, reduce its debt and strengthen its balance sheet. Importantly it would allow for greater production of higher-margin mozzarella and lactoferrin.
"We are pleased to be forging this relationship with Aurora who shares Beston's desire to invest in growing the milk pool in South Australia over time," CEO Jonathan Hicks said at the time.
However, Beston will continue feeling the benefits of its former farms over a 10-year period. Specifically, Beston has secured 17 million litres per annum of milk supply for 10 years at prevailing market prices. Additionally, it has secured 24 million litres of milk from Aurora's other farms within the region.
"The additional milk we have secured at market prices supports our drive toward increasing production of higher-margin products, particularly mozzarella and lactoferrin," Beston Chairman Dr Roger Sexton.
Money from the sale will reduce debt gearing levels to 10 per cent which better equips it to deal with any challenges or opportunities that may arise from COVID-19.
FIRB approval was necessary as Aurora is funded by the Canadian Pension Fund. Receiving FIRB approval means the purchase is now unconditional and settlement is scheduled for August 31, 2020.
Share purchase plan
The share purchase plan (SPP) was offered to retail investors and close on July 24. It raised a total of $1,162,125.
Under the offer, 13,671,990 shares will be issued to participating retail investors and will rank equally with existing shares of Beston from the issue date.
Under the SPP, new ordinary shares will be issued at 8.5 cents each which is the same price offered under the placement.
The SPP follows the institutional placement completed on June 26 which raised $10 million. Beston is also using the money from the placement to expand lactoferrin production capacity at its Jervois facility.
"Funds raised from both the SPP and Placement will cover most of the expected $12.2 million construction cost of our lactoferrin plant expansion at Jervois, the work for which has already commenced," Roger stated.
Work has started on the new facility with skim milk-based technology being adopted. This technology enables you to extract lactoferrin at the start of cheese production, rather than at the end.
Reportedly, the new facility will quadruple lactoferrin production capacity to 12 tonnes per annum. Beston expects construction will be completed in the third quarter of FY21.
Company shares closed 2.27 higher today, to trade for 9 cents each.