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8-K - YUHE INTERNATIONAL, INC. | v207122_8k.htm |
Yuhe
International Inc.
Yuhe
International Acquires Ten Breeder Farms in Liaoning and Henan Provinces in
China
- Yuhe’s
production capacity to be expanded by 43% to 3.15 million sets of parent
breeders, positioning Yuhe further ahead of its competitors
-
Production base to be expanded into Henan Province, a large broiler
market in China
- 20% of
the acquisition consideration to be paid in Yuhe’s common stock, the second time
Yuhe conducted stock-and-cash acquisition, reflecting the industry’s
recognition and confidence in Yuhe’s growth
-
Construction of new hatchery facility progressing well
Weifang, Shandong Province, P.R.C.
January 4, 2011 - Yuhe International, Inc. (NASDAQ: YUII) (“Yuhe” or “the
Company”), a leading supplier of day-old chicken raised for meat production, or
broilers, in the People's Republic of China (“PRC”), today announced that the
company’s wholly owned subsidiary, Weifang Yuhe Poultry Co., Ltd. ("Weifang
Yuhe"), entered into a series of asset purchase agreements to purchase ten
breeder farms in Liaoning and Henan Provinces, China, for an aggregate purchase
price of RMB 108,686,716, or approximately USD 16.4 million. The ten
breeder farms are purchased from six individuals engaged in large-scale parent
breeder raising businesses in China (collectively “Sellers”), where
eight breeder farms are in Liaoning Province, and two are in
Henan Province.
Pursuant
to the terms of the asset purchase agreements, the acquisition
consideration will be paid in combination of cash and Yuhe’s stock. Total
cash consideration amount to RMB 80,098,406, or approximately USD 12,099,457.
The share consideration is calculated at a price of $10 per share with total
share consideration equal to approximately RMB 28.6 million, or approximately
$4.3 million, for approximately 431,848 restricted shares of Yuhe’s common
stock. The restricted shares are subject to a six-month lock-up
period.
The ten
breeder farms have a total production capacity of 950,000 sets of parent
breeders, covering an area of approximately 91 acres (558 Mus) with a
building coverage of approximately 1,471,869 square feet (136,740 square
meters). The assets purchased include the buildings and breeding equipment
for the breeder farms, as well as land lease rights with terms
ranging between 20 years and 50 years. Upon closing, Yuhe will
have an increased production capacity of 3.15 million sets of parent breeders,
accounting for 8% of China’s broiler market in terms of
production capacity. Geographic details for the ten acquired breeder farms
are as following: one farm in Anshan City, Liaoning Province; One farm in
Wafangdian City, Liaoning Province; Two farms in Haicheng City, Liaoning
Province; One farm in Dandong City, Liaoning Province; Three farms in Shenyang
City, Liaoning Province; and two farms in Zhoukou City, Henan
Province.
Mr.
Zhentao Gao, Chairman and CEO of Yuhe International, commented, “We are
very pleased to acquire
the ten new breeder farms in
China as
planned.
The
highlights of this acquisition lie in two aspects, one being that the
Company had gained access to a large quantity of breeding land with reasonable
terms; and the other being that we were able to retain a large number of
experienced and skilled workers. Both factors are current bottlenecks to
self-constructing such breeder farms.”
301
Hailong Street, Hanting District, Weifang, Shandong Province, China
Contact:
+86-536-736-3688 www.yuhepoultry.com
Yuhe
International Inc.
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December
15, 2010
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The
average cost of acquiring a 100,000-set-parent-breeder-farm in this
transaction was RMB 11,440,700 (approximately $1.85 million), approximately 25%
higher than the average acquisition cost of RMB 9,176,000
(approximately $1.48 million) in June 2010 for a comparable breeder
farm. The cost increase was mainly driven by the increased land lease right
fees from RMB 1,000 per Mu to RMB 1,400 and RMB 1,700 per Mu in Liaoning
and Henan Province, respectively. Cost for acquiring farm buildings
increased slightly, as a result of purchasing more steel-structured farms with
higher unit cost. The average costs for the Company to acquire these
breeder farms remain lower than those to build such farms from
scratch.
At the
time of signing the contracts, the age of the existing breeding stocks at the
acquired farms were between 23 and 52 weeks, and such existing breeding stocks
are expected to retire at the 67th
week. Due to quality assurance purposes, Yuhe will only take the
ownership of the acquired breeder farms when all existing breeding stocks
retire. Upon closing, Yuhe plans to spend RMB 10 million (approximately USD
1.6million) on a two to three-month facility restoration and employee training
program. The Company plans to put the first batch of 550,000 sets of parent
breeders into production by the end of the third quarter of 2011, and the
remaining 400,000 sets by the end of the fourth quarter of 2011. The production
increase will be reflected in the Company’s broiler output in 2012, when the
breeding stocks enter their egg-laying peaks. This revenue-contribution
timeframe is similar to that in Yuhe’s previous acquisitions in December 2009
and June 2010, where the production increase from an accumulated 1.05 million
sets of parent breeders is expected to be reflected in the Company’s broiler
output in 2011.
The
Company also announced that the constructions of its hatchery facilities were
progressing well. The third hatchery facility equipped with 60 hatchers has
completed construction and commenced operation with the first batch of 40
hatchers. The fourth hatchery designed to have 100 hatchers will begin
construction in the first quarter of 2011.
Mr.
Vincent Hu, CFO of Yuhe International, commented, “The Company’s future
profitability is expected to be improved as a result of
this acquisition. We expect the consequential increase in sales
volume in 2012 will translate into a lower
unit administrative cost and higher operating margin.”
“This
acquisition was completed amid a booming broiler market in China,” commented Mr.
Zhentao Gao, CEO of Yuhe International, “The successful acquisition demonstrates
that Yuhe is capable of leveraging on its industry experience and reputation to
capture industry consolidation opportunities in both rising and falling
markets.”
”This is
the third acquisition carried out by Yuhe, and is also the second acquisition
that used our stock as partial acquisition consideration. Based on our previous
experience in acquisition and post-acquisition integrations, we expect that this
acquisition, being the largest in the Company’s history, to be successfully
completed as the previous ones.” Mr. Gao added.
“It
is a strategic milestone in our history that our production base
expands into Henan Province after our expansion into Liaoning Province
in 2010,” Mr. Gao continued, “We currently focus our hatching and sales
network in Shandong Province, and we plan to expand the sales network into
wider geographic areas after commanding a meaningful market share in Shandong.
Having production bases stationed outside of Shandong Province lays
strategic foundation for the Company’s future nation-wide market penetration. We
will continue to leverage on our core competencies and in-depth knowledge of
China’s broiler industry to carry out our long-term strategy.” Concluded Mr.
Gao.
301
Hailong Street, Hanting District, Weifang, Shandong Province, China
Contact:
+86-536-736-3688 www.yuhepoultry.com
Yuhe
International Inc.
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December
15, 2010
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Conference
Call
The
Company will host a conference call at 9:00 a.m. Eastern Time on Wednesday,
January 5, 2011, to discuss the acquisition in further details. To participate
in the live conference call, please dial the following number five to ten
minutes prior to the scheduled conference call time. Conference ID #
34954039
USA
Toll-free: 18662421388
China
Toll-Free: 4006988166
International
Dial-In: + 61288236760
About
Yuhe International, Inc.
Yuhe
International Inc. is one of the largest day-old broiler producers in China.
Founded in 1996, the Company operates in the middle of the commercial broiler
chicken supply chain, where it purchases parent breeding stock from breeder
farms, raises them to produce hatching eggs, and hatches the eggs to live
day-old broilers, which are then sold through 38 distributors to its end-users,
such as integrated chicken companies and broiler raisers. Headquartered in
Weifang, Shandong province, the Company has two operational subsidiaries,
Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., the latter of
which largely supplies the Company's internal demand for chicken feed.
Currently, the Company has approximately 1400 employees with 33 breeding farms
and 3 hatchery facilities. Approximately 90% of the Company’s current sales are
in the Shandong province with a customer base across 10 Provinces in China. The
Company has passed ISO9001 certification and operates imported state-of-the-art
equipment, adhering to the international standards of operation. For more
information on the Company and its products, please visit http://www.yuhepoultry.com.
Cautionary
Statement
This
press release contains forward-looking statements concerning the Company’s
business, products and financial results. The Company’s actual results may
differ materially from those anticipated in the forward-looking statements
depending on a number of risk factors including, but not limited to, the
following: general economic and business conditions, development, shipment,
market acceptance, additional competition from existing and new competitors,
changes in technology, and various other factors beyond the Company’s control.
All forward-looking statements are expressly qualified in their entirety by this
Cautionary Statement and the risk factors detailed in the Company's reports
filed with the Securities and Exchange Commission. The Company undertakes no
duty to revise or update any forward-looking statements to reflect events or
circumstances after the date of this release.
###
Contact
Information:
Yuhe
International Inc.
www.yuhepoultry.com
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Ms.
Serena Wu
Investor
Relations
+1
(646) 502-8625
Email:
serena.wu@yuhepoultry.com
Mr.
Vincent Hu
Chief
Financial Officer
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Email:
vincent.hu@yuhepoultry.com
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301
Hailong Street, Hanting District, Weifang, Shandong Province, China
Contact:
+86-536-736-3688 www.yuhepoultry.com