Danone's purchase of Yashili stake given cool market reception
Deal seen as move to revive China sales after infant milk powder scare
A unit of French food giant Danone is buying a 25 per cent stake in Chinese milk powder maker Yashili International for HK$4.39 billion to revive its mainland sales which suffered from the scare over raw milk powder supplied by New Zealand's Fonterra Cooperative Group.
However, Hong Kong-listed shares of the Chinese company fell as analysts reacted negatively to the news.
Danone Asia Baby Nutrition, the wholly owned Singapore unit of Danone, is buying 1.19 billion Yashili shares at HK$3.70 per share, according to a joint statement issued yesterday by Yashili and parent firm China Mengniu Dairy. Under the deal, Mengniu's stake in Yashili will drop to 51.04 per cent from 68.05 per cent.
Yashili's Hong Kong shares fell 9.15 per cent to finish at HK$2.88 yesterday, when trading resumed after being suspended on October 29. In contrast, shares of Mengniu Dairy rose 2.24 per cent to HK$34.25.
"The market is negative on whether the cooperation between Danone and Yashili will yield anything good," said Summer Wang, an analyst at Bocom International.
Mengniu and Yashili said they are also considering taking a minority stake in Dumex China, a Chinese subsidiary of Danone.