TPG, Northstar commit $236m to Japfa's SE Asia dairy business

The target is a vertically integrated business ranging from farms to dairy products. It has 16,000 head of Holstein and Jersey cattle across two farms – it is Indonesia’s largest producer of premium fresh milk – and sells fresh milk, yogurt, UHT milk, and premium cheeses under the Greenfields brand. Greenfields products are exported from Indonesia to the likes of Singapore, Malaysia, Brunei, and Myanmar.

The transaction gives the Southeast Asia dairy operation an implied enterprise value of $334.7 million, or 21x EBTIDA for the 12 months ended December 2019.

Japfa will retain a 20% interest in the business, but the company wants to focus on its core poultry and swine assets in Indonesia and Vietnam, respectively, as well as its China dairy operation. TPG and Northstar will support expansion, with demand for quality dairy products like milk and yogurt expected to grow in Southeast Asia in the coming years.

“This is the third recent investment for TPG in the dairy sector and we are delighted to do another investment in Indonesia. We strongly believe that the Greenfields brand and product quality will allow it to continue to grow in consumer appeal,” said David Tan, a managing director with TPG, in a statement. “We look forward to helping the business further expand its leading position in the dairy sector and deliver accelerated growth amid the rising consumption in Southeast Asia.”

Japfa’s China dairy business – AustAsia – is also the product of a partnership with private equity. Proterra Partners first backed AustAsia in 2010, with Japfa coming in three years later. In 2018, Japfa acquired Proterra’s remaining 38% interest for $263.1 million, enabling the private equity firm to more than doubled its money on what was a $100 million-plus investment.

AustAsia operates seven farms in China with more than 80,000 head of cattle and generates annual sales of $380 million. Japanese food and dairy giant Meiji Holdings is one of its major customers. Earlier this year, Meiji bought a 25% stake in AustAsia for $254 million. While the deal was positioned as a growth play, it enabled Japfa to pay down debt and strengthen its balance sheet.

The parent company is one of Asia’s leading low-cost producers of protein staples including poultry, swine, aquaculture, beef, and dairy as well as protein-based consumer products. It takes a vertically integrated approach across all business lines, from feed and breeding to milking and fattening to processing and distribution.

Dairy revenue reached to $471.5 million in 2019, up from $408.7 million a year earlier, while EBITDA rose from $102.9 million to $123.3 million. The Southeast Asia operation contributed $96.2 million in revenue, with the rest coming from China. Sales volume in Southeast Asia rose 38% year-on-year to 37 million liters in 2019 following the launch of the second farm. There were nearly 9,000 milkable cows across the two locations, producing an average of 31.1 kilograms per head each day.

Japfa’s total revenue for 2019 was $3.89 billion. The company’s Indonesia poultry and beef operations contributed two-thirds of this.

TPG and Northstar are relatively frequent collaborators in Southeast Asia as part of a longstanding strategic relationship. When Northstar raised its debut fund in 2006, TPG participated as an LP. Five years later, TPG acquired a minority stake in Northstar, which in turn received a smaller interest in the global private equity firm’s Asia business.

Other collaborations include providing $1 billion in financing to Indonesian conglomerate Salim Group in 2015, a deal in which Gateway Partners also participated. The founder of Salim pledged shares in several assets, among them Indomaret, the country’s largest convenience store operator. This year the transaction was refinanced, with a larger debt package replacing most of the equity. The investors received nearly $1 billion and retain a small stake in Indomaret.

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• Topics
• Southeast Asia
• Consumer
• Buyouts
• Indonesia
• Northstar Group
• TPG Capital
• Agriculture