Wattle Health Australia Signs HOA with Organic Dairy Farmers of Australia Wattle Health Australia has entered into a non-binding heads of agreement with Organic Dairy Farmers of Australia Pty Ltd, Mason Ventures Ltd (an indirect wholly-owned subsidiary of Mason Group Holdings Limited) and Niche Dairy Pty Ltd (wholly-owned by Mr. Andrew Grant, the founder of Blend & Pack) to undertake a commercial due diligence for the establishment of a joint venture for the production of organic powdered milk. Where the parties determine to proceed after that commercial due diligence and agree on binding legal agreements, Wattle Health Australia will acquire a 2.5% of the proposed joint venture, with Organic Dairy Farmers holding 50% and the remaining interests to be held by Mason Ventures Limited and interests associated with Andrew Grant. Organic Dairy Farmers presently source and produce in excess of 75% of all fresh organic milk production in Australia. It is proposed the joint venture would construct a milk spray drying plant to process Australian Certified Organic Milk to produce dried Organic Infant Formula and base powders for Supply to the consortium partners (including Wattle Health Australia) on a take or pay basis. Where the joint venture proceeds, it will provide for Wattle Health Australia as a consortium partner to have exclusive supply from the proposed joint venture of 100% dried Australian Organic and Nutritional Dairy products. 19 July 2017: (WHA:ASX) is pleased to announce it has entered into a non-binding heads of agreement (HOA) to undertake commercial due diligence for the establishment of a joint venture for the production of dried organic powdered milk. Where the parties determine to proceed after that commercial due diligence and agree binding legal agreements, WHA will acquire a 2.5% equity interest in a proposed joint venture (JV) with Organic Dairy Farmers of Australia Pty Ltd (ODF), and Mason Ventures Limited (Mason Ventures) (an indirect wholly-owned subsidiary of Mason Group Holdings Ltd. (Mason) and Niche Dairy Pty Ltd (wholly-owned by Mr. Andrew Grant, the founder of Blend & Pack).
It is proposed that where the parties agree on the commercial due diligence, they will establish a JV to construct a powdered milk spray drying plant (the Facility) located adjacent to ODF s current Geelong based National Organic Milk Processing Centre to process Australian Certified Organic Milk and conventional milks supplied exclusively by ODF. Under the HOA the consortium partners (including WHA) under a take or pay arrangement is to be supplied all of the infant milk formula produced by the JV for conversion into canned infant and other nutritional milk powder product through the Facility. The construction of the Facility is anticipated to be between $25- $30 million and will be funded by the way of a loan to the JV by Mason Ventures, interests associated with Andrew Grant and WHA. Where the joint venture proceeds, WHA contribution will be a maximum of A$1.5 million for its 2.5% equity in the JV. It is proposed that the WHA loan to the JV is to be paid back from the operations of the facility and WHA would have priority over retained earnings of the JV and the payment of dividends to the JV shareholders. The HOA is non-binding (other than exclusivity / costs) and subject to final commercial due diligence by the parties. A refundable deposit of $500,000 will be paid, with WHA paying $25,000. Participation by WHA in the JV (where it proceeds) will secure for WHA the supply of Australian Organic Milk with ODF (which presently source and produce in excess of 75% of all Organic Australian Milk in Australia). Funding WHA has secured a loan (Loan) from Mason Resource Finance Limited (MRF) for the WHA s contribution to the JV. This will ensure WHA has the financial resources to fund (i) the acquisition of an interest in the JV; and (ii) ensure WHA is able to continue to execute its business objectives as specified in the IPO Prospectus dated 13 January 2017.
The MRF Loan is for a maximum of USD 1,125,000 at an interest rate of 13% per annum, with interest payable on the amount drawn down by WHA under the Loan. The Loan is for a maximum period of 24 months, with WHA having the ability to pay any outstanding amount at any time at its discretion. MRF as part of the terms for the provision of the Loan will be granted by WHA a 12 month option (Option) to subscribe for up to AUD 500,000 of ordinary shares in WHA at a minimum subscription price of AUD0.55 per share. In the event WHA in the following 3 months conducts an equity raise higher than AUD0.55 per share the subscription price under the Option will be equivalent to the issue price under the equity raise. About Organic Dairy Farmers Australia Pty Ltd. Organic Dairy Farmers of Australia Ltd is a farmer owned Co-Operative (ODFA) formed in 2001 by a group of farmers determined to develop organic dairy farming in Australia, to differentiate their dairy products from commodity markets and maximise the organic farmgate milk price for co-operative members. ODFA supplies over 75 per cent of all organic milk produced in Australia and comprise certified organic and bio-dynamic farms across the main dairying regions of Victoria. ODFA farmers are certified organic and they comply with a strict set of standards. They do not use synthetic or artificially produced pesticides, herbicides, fertilisers or GMOs (genetically modified, transgenic organisms). Their cows are fed predominantly on pasture which is completely GMO free. ODFA farmers have a genuine concern about the long-term health of the land and about the herd s welfare. This results in happy cows and remarkable tasting organic milk and dairy products. Organic production is a holistic system designed to optimise the productivity and fitness of diverse communities within the agro-ecosystem, including soil organisms, plants, livestock and people. Organic farming systems aim to develop enterprises that are sustainable and harmonious with the environment. The business is experiencing strong growth in demand and has made a strategic decision to focus on being an ingredient supplier to customers seeking organic milk and dairy powder
products. Up until 2015, the ODFA co-operative was heavily reliant on contract manufacturing for a major part of the production of value added products. These products provided an opportunity to add value to organic milk returns and manage milk supply. Joint ventures have been established for the production and marketing of cheese and butter products. From 2016, the cooperative made its first capital investment in a milk processing plant in North Geelong. This has been a defining point for the longer-term future of the cooperative. This plant provides manufacturing capability for valued added products. The Australian Organic Dairy Centre has significant potential for additional production of organic dairy products, as the co-operative has invested in a specialty cheese plant, new infrastructure including milk receival and storage and processing of milk separation and cream pasteurization. ODFA has a diverse business model with established long term strategic partnerships with customers. The co-operative supplies unique organic milk and dairy ingredients to companies in Australia and overseas who in turn carry the ODFA brand, True Organic, as a mark of quality and integrity. Stewart Price CEO Organic Dairy Farmers of Australia Ltd: Demand for organic milk is growing rapidly and creating exciting opportunities for our co-operative. We are wellpositioned for growth through innovation and investment in our new Australian Organic Dairy Centre based at Geelong, now processing milk and cheese. This business venture enhances this capability and will allow more milk supply, which improves utilisation and enables the business to manage additional supply of seasonal milk. Having a 50% ownership of this venture, allows the manufacture of organic powder at North Geelong to create a virtuous cycle for the business, and further enhance the long-term security and sustainable returns for our Farmers. It allows ODFA to meet the unprecedented demand from farmers wishing to convert to organic milk production and to tap into the demand for high quality sustainable Australian dairy products to secure their futures.
The opportunity to be the first business to supply commercial quantities of Australian Organic dairy powders, is gratification of the many years of hard work. Kylie Doyle Chair Organic Dairy Farmers of Australia Ltd: The announcement today is an important signing for the Cooperative and importantly ODFA shareholders. The collaborative approach for the proposed investment with Mason Ventures Limited, Andrew Grant and Wattle Health Australia Ltd, is ultimately to provide further stability and sustainability to our ODFA suppliers. And furthermore, allow ODFA to continue to grow and meet market demands and ensure we remain the leading supplier of organic milk in Australia. Our existing stakeholders and customers are pivotal to ODFA success and we consider this signing as another significant relationship and look forward to its development. About Mason Group Holdings Limited Mason is a conglomerate which principally provides comprehensive financial services in Hong Kong, including dealing in securities, commodities broking, bullion trading services, provision of securities margin financing, provision of investment and corporate finance advisory services, investment in securities trading, money lending and investment holding. In addition to its financial services, Mason is also principally engaged in the healthcare and mother and child care related business. Capitalising on its existing financial services platform, the Group continues to develop its business into direct investment, provision of wealth management complimenting the securities and fund management business. We believe that quality and reliance of supply is important in the paediatric nutrition products industry said Mr. Joel Chang, Group COO of Mason Group Holdings Limited. With the recently announced acquisition in Blend and Pack, entering into strategic alliance with ODFA will further strengthen our ability to expand our growth in both Australia and overseas nutritional product markets by partnering with the very upstream resources and
securing the production capacity for the source of very high-quality organic dairy products in Australia. Brilliant River Limited Correction Further to WHA's announcement on 12 July 2017, WHA would like to clarify that Brilliant River Limited, which holds 9.48% of ordinary shares in WHA, is indirectly wholly-owned by a private equity investor (the "Investor") who is independent of Mason and its connected persons. The Investor was instrumental in introducing WHA to Mason and its mum-andbaby retail chain subsidiary in China, and, through his connections, also helped WHA to enter into the China market. Based on public information and our confirmation with Mason, as of the date of this announcement, Mason does not hold any shares and interest in WHA. About Wattle Heath Australia WHA is an Australian Company, based in Melbourne Victoria, committed to developing, sourcing and marketing high quality Australian made consumer food products. WHA objective is to be the brand of choice in the Australian domestic market and also expanding its footprint internationally. is very excited about this new proposed venture. It will result in Wattle Health Australia being one of the first fully vertically integrated nutritional dairy companies, using Australian Organic milk in its base powders. This will allow Wattle Health Australia to effectively manage its supply chain and meet the insatiable demand for quality Australian Organic milk products. Wattle Health Australia is proud to be associated with this Consortium of partners and to take quality Australian Organic Milk products to the world said Mr. Lazarus Karasavvidis Executive Chairman. Lazarus Karasavvidis Executive Chairman
Media Contact Corporate Affairs & International Investor Relations Melissa Mack Peter Nesveda Email: melissa.mack@mcpartners.com.au Email: peter.n@wattlehealth.com.au Telephone: +614 30 119 951 Telephone: 1300 88 79 69