The Company also entered into an agreement to purchase land use rights for a 5.3-hectare parcel of land in Weifang, Shandong Province, where the Company intends to build a new breeder farm.
The aggregate purchase price for the 13 breeder farms is RMB103.87 million (approximately $15.2 million). The farms are expected to be handed over in March.
Built from 1996 to 1999, the farms cover a total area of 37 hectares, for which Yuhe acquired all the ground buildings as well as the land use rights for 36 years.
The purchase price also includes in-house breeding facilities which supply feed, water and air to the parent breeders.
The breeder farms are in good condition and require only RMB17 million (approximately $2.5 million) for renovation. These farms will add 600,000 parent breeders for Yuhe by the third quarter of 2010.
Quick production increase
"By purchasing these thirteen breeder farms, we are able to quickly increase our production capacity of day-old broilers," said Zhentao Gao, CEO of Yuhe.
"We will leverage our expertise in modern chicken breeding, disease prevention and animal husbandry science to capture the tremendous market potential for poultry in China."
New breeder farm
In a separate agreement, Yuhe purchased the land use rights for 50 years of a 5.3 hectare parcel of land for RMB20.0 million (approximately US$2.95 million) including a building and other facilities within the area.
The construction of this new breeder farm with a housing capacity of 120,000 broiler breeders will start in February 2010 and finish by the second quarter of 2010. Investments will be around $2.5 million.
"Our solid balance sheet and strong operating cash flow will support our capital expenditures. Furthermore, the newly acquired land use rights provide us with additional financial flexibility as they can be used as collateral for long term bank loans," concluded Gao.
