Poultry firm Lay Hong BHD of Malaysia has entered into a joint venture (JV) agreement with NH Foods of Japan.

This move marks Lay Hong BHD’s first step into overseas markets with a large growth potential such as Singapore and Japan, reports The Star.

Under the agreement, a private limited company - NHF Manufacturing (M) Sdn Bhd - will be set up to manufacture, market, distribute and sell processed meat-based foods.

“The JV agreement will enable Lay Hong to leverage on NH Food’s research and development (R&D) as well as manufacturing skills, to enable overseas market penetration,” said Lay Hong executive director, Yap Chor How. “In addition, the JV is expected to improve Lay Hong’s financial position in the long run and transform it from a poultry player to an integrated food company.”

As Japan’s largest company and fifth largest in the world by sales, NH Foods (also known as Nippon Ham), will benefit from the deal with an enhanced business presence in the South-East Asian market.

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According to The Edge, the deal involves a 49-51 joint between Lay Hong and NH Foods in an MYR30 million (US$7.6 million) processed food plant at Kuala Selangor.

“There are synergies to be derived from this partnership,” said NH Foods vice-president and representative director, Yoshihide Hata.”First, there is [Lay Hong’s] Nutriplus branding, which is well established in Malaysia. Second, Lay Hong has the halal certification, which will allow us to penetrate further into Islamic markets and diversify our customer base.”

NH Foods became a shareholder in Lay Hong on in January of 2016, after buying a 9.09 percent stake in the company, and this was followed by a further 13.8 percent stake with a direct business transaction, bringing its direct interest in Lay Hong to 22.94 percent.

With a declining population in Japan, NH Foods has been expanding aggressively overseas, particularly in emerging economies, reports Asia Nikkei. The foreign contribution to group sales reached around 10 percent in March 2015. NH Foods has announced it plans to invest US$250 million in overseas business by March 2018, which is almost five times its spending over the past 3 years. It already has a presence in 18 countries, five of them in Southeast Asia.

With Lay Hong’s halal expertise, NH Foods hopes the JV will lead to the launch of innovative products, such as ready-to-eat meals targeting upper middle-income earners as early as September 2016.