Oceania Natural forms new Hong Kong joint venture

Oceania Natural forms new Hong Kong joint venture to fast track growth in China

AUCKLAND, New Zealand, 19 July 2016 - Premium food and supplements company Oceania Natural Limited (NXT: ONL) has secured HK$19.5m in funding to establish Oceania Natural Asia Limited (ONL Asia), a new subsidiary in Hong Kong formed to help accelerate the growth of ONL’s distribution network in China.

Oceania Natural Asia Limited has been incorporated as a joint venture, to serve as a holding company for ONL’s business operations in China. Ownership is shared between ONL (51%) and a number of Chinese and New Zealand qualified investors. This ownership structure gives ONL a controlling interest over the retailing of its products in China.

The minority share (49%) of ONL Asia is held by a number of qualified investors based in China and New Zealand, with the total cash raised from their investment amounting to HK$19.5m (approx. NZ$ 3.5m). Many of these investors maintain extensive distribution networks: for example, one investor has access to more than 2,000 pharmacies across China. Investor subscription and shareholders’ agreements have been entered into, to secure this funding.

Wuxi City earmarked for new China headquarters
In addition a new subsidiary, Oceania Natural (Wuxi) Co Ltd., of ONL Asia, is to be established. A business application to establish a physical presence in Wuxi City has been submitted for approval, a prerequisite to operating a business in China. Wuxi will serve as the central location from which ONL will manage and grow its distribution network in new provinces within China. Oceania Natural (Wuxi) will be located in the city’s central business district and will showcase the company’s product range, while serving as the operational headquarters of ONL in China.

Existing supplier agreements maintained
ONL will continue to supply product, through its three existing independent distributors, which are not impacted by the new structure and maintain their distribution agreements within their exclusive geographic areas (Shandong, Guizhou and Wuxi).

ONL CEO Walker Zhong comments:
“Today’s announcement is exciting news for us. We remain focused on growing our distribution networks and increasing supplier partnerships. It is encouraging to have reached an arrangement enabling us to fast-track our distribution networks without needing to ask our shareholders for funding.

“This will allow us to expand more quickly and build our distribution and supplier networks to ensure we are in a strong position for the latter half of the financial year, when our sales are traditionally stronger due to celebrations around Christmas, New Year, Chinese New Year and Valentine’s Day taking place. ONL must lay this important groundwork now, to position us well for future growth.”

Background to today’s announcement
The joint venture was one of a number of strategies under review with distribution partners and potential investors over the past few weeks, as announced to the market on 5 July 2016.

The discussions with a new potential South Korean distribution partner and with New Zealand honey suppliers also referred to in the 5 July market communications are still ongoing.

The company will update the market once new arrangements are finalised.

ENDS

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