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Tianli Agritech, Inc. Acquires Tenth Hog Farm

by 5m Editor
17 December 2010, at 10:06am

CHINA - Tianli Agritech, Inc., a leading producer of breeder hogs and market hogs based in Wuhan City, China, yesterday announced that it has entered into an agreement to purchase the assets of Hengdian Farm, a 20,000 head annual production capacity hog farm located in Wuhan City, China and owned by Wuhan Taida Breeding Co. Ltd.

The agreement calls for payment of approximately $1.4 to $1.6 million to the seller to be finalized upon the transfer of equipment. The Company expects to close the transaction by the end of December 2010.

"We are very excited about this acquisition, which will become our tenth farm," began Tianli's Chairwoman and CEO, Hanying Li. "We identified this farm as an acquisition candidate in September and upon making a $400,000 deposit, our team began an extensive due diligence process. We have acquired and integrated multiple farms over the past four years, and we are confident in our ability to successfully equip this farm to produce the high quality breeding and market hog stock for which Tianli is well known," Ms Li continued. "After we upgrade the farm equipment and complete the cleansing process, we will populate the farm with high-quality breeding stock. We expect these breeders will arrive in February, enabling the initial production to be brought to market in the fourth quarter of 2011. While this farm will have a minimal impact on the Company's 2011 financials, once it reaches full operating capacity in 2012, it will generate annual revenue of approximately $4.5 million at current market prices, with a targeted operating margin of approximately $1.8 million."

Hengdian Farm is located in Wuhan City. The facilities are in good condition as the farm was constructed in 2008 and only operated for a few months after completion. The Company will acquire the rights to 462 acres of land, 30 buildings and a variety of associated equipment. Tianli plans to invest approximately $500,000 to upgrade the farm's facilities and transfer its breeding stock to the Hengdian Farm.

Ms Li concluded, "We expect our ninth farm, which we completed the construction in summer of 2010 and is currently selling breeder hogs, will reach its full annual hog production capacity of 20,000 by next summer. Including the 20,000 production capacity we expect from the Hengdian Farm, our total annual hog production capacity would increase by approximately 36 per cent to 150,000 hogs. We continue to actively pursue additional asset purchases like Hengdian, which we anticipate will generate a very attractive return on invested capital, resulting in a short payback period. Our existing cash balances plus strong cash flow provide us with the ability to fund continued growth."