Chinese citrus producer DongFang Modern is moving into the lucrative supplement market – today announcing the $18 million acquisition of Aussie skincare maker Bio Health Pharmaceuticals.

DongFang called the purchase a “transformative” move to broaden the group’s revenue base outside of China into the high margin supplement market.

DongFang already produces products such as camellia, navel orange, pomelo and tangerines in 21 plantations covering 10,763 hectares in a key China fruit growing region, the Jiangxi Province.

The acquisition would give it the ability to create new products form the produce — such as camellia oil.

“We intend to invest a further $5 million in Bio Health’s facility subject to certain conditions, enabling Dongfang to process camellia fruit into camellia oil products such as skin care and cosmetics for export under a new consumer brand,” chair Hongwei Cai said.

“It provides the building blocks for Dongfang to become a premium health supplements provider in China, Australia and internationally.”

The shares (ASX:DFM) were up 3 per cent to $1.10 by 11.30am AEST Monday. DongFang is capped at about $450 million.

Dongfang Modern Agriculture (DFM) shares over the past six months.
Dongfang Modern Agriculture (DFM) shares over the past six months.

Sydney-based Bio Health makes complementary medicines, health and skin care products and provides research and development for product safety.

The deal values the manufacturer at $25.3 million. DFM says that’s five times its expected 2019 earnings.

“Initially we will focus on exporting Australian-made products into the Chinese market, using our existing supply chain,” Mr Hongwei Cai said.

“We believe this will contribute to increasing shareholder value through greater profitability and a more diverse and even cash flow.”

Since its formation in 2009, DongFang says it has grown to become one of the biggest  agricultural harvesters in China.

It hopes to tap a growing health food market in China, valued at RMB200 billion (AUD 41 billion) and what is forecast to grow 10% per cent year-on-year between 2015 and 2025.

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