China's Mengniu Dairy is closing in on Victoria's Burra Foods, in a deal that would value the infant formula manufacturer at more than $300 million and deliver a windfall for Gippsland farmer owners Grant and William Crothers.
Burra shareholder and founder Grant Crothers said the process was continuing, and Burra, which has an annual milk supply of about 300 million litres, was in discussions with a number of parties.
He said he hoped a transaction would be completed before June.
The transaction, which other sources said could be announced as soon as this week, comes as China clamps down on imports of infant formula and other products, a move that has sent shares in market darlings like Bellamy's plunging as investors try to calculate how sales will be affected.
Mr Crothers also downplayed fears the Chinese clampdown would affect Burra's valuation.
"Regulatory risk in China is always a concern," he said, but added it wasn't much of an issue for Burra which manufactures and processes milk products for customers, including the Victor Smorgon Group, which sells infant formula products under the brand NutraCare over the internet to wealthy Chinese families.
Burra Foods, in which Japan's Itochu Corporation invested in 2009 as the company looked to expand into manufacturing infant formula, has been examining a potential sale or sharemarket listing for a number of years.
As part of the mooted transaction, Grant Crothers and Itochu Corp are expected to both retain stakes of 10 per cent in the company.
Mr Crothers, who owns 55 per cent of Burra with his brother, said as third-generation dairy processors "I'd be happy to continue with that" in response to a question about whether he wanted to stay invested in the business or sell outright.
ANZ and Moelis are thought to have advised on the sale, which has been one of the most protracted negotiations in the market. A deal with Mengniu is likely to require Foreign Investment Review Board approval.
Burra has engaged a number of different advisers over the years to explore its options.
China Mengniu Dairy Company Ltd is one of the country's largest manufacturing and distribution companies of dairy and ice-cream. It is based in inner Mongolia.
