Shanghai Maling, a unit of state-owned Bright Food Group, will acquire a 50-percent stake in New Zealand's biggest meat cooperative and producer of beef and lamb, Silver Fern Farms, for $197 million.
It is the single largest amount invested in the New Zealand red meat industry as China eyes more agricultural imports to satisfy consumer demand.
The deal will give Shanghai Maling access to 25 percent of the high-quality beef and lamb supply sources and help reach its goal of becoming the top beef and lamb processor in China.
Shanghai Maling will set up a comprehensive procedure from slaughtering to processing and to exporting beef and lamb products.
Consequent to the deal, Shanghai Maling will expect revenues of 25 billion yuan to 30 billion yuan.
New Zealand, the world's biggest lamb exporter and the fifth-largest overseas supplier of beef, exports more than 30 percent of its production to the Chinese market.
Silver Fern Farms, a farmer's cooperative, controls about 27 percent of New Zealand's beef and lamb exports and is the second-largest agricultural product exporter in New Zealand after Fonterra Cooperative Group Ltd.
However, it has been plagued by inept management decisions, cyclical losses and a failure to address rampant inefficiencies and needs money from the sale to settle debt.
Their bankers--HSBC, Westpac, Rabobank and CBA--have reportedly pressured Silver Fern Farms' board to stop blocking attempts to keep the meat processor a New Zealand-controlled entity.
The banks want Silver Fern Farms' debt settled and won't finance competitive offers.