NewYashili eyes China’s baby formula boom, set to buy Danone’s unit for HK$1.2 billion
Mainland milk company expand by buying French peer
Yashili, a top Chinese baby formula maker, agreed Wednesday on a deal to buy domestic rival Dumex China, a unit of French dairy giant Danone SA, for 150 million euro (HK$1.2 billion) in cash, according to a joint statement by Yashili and its majority shareholder Mengniu Dairy.
Shares of Yashili advanced 1.6 per cent in Hong Kong to close at HK$1.94, while China Mengniu Dairy Company ended flat at HK$12.36.
The deal came after Danone, Yashili and Mengniu Dairy signed in July a memorandum of understanding (MOU) that said Danone will sell Dumex to Yashili and use the proceeds to buy shares in Mengniu Dairy, one of China’s largest milk producers.
However, Mengniu said in the Wednesday statement that the company and Danone agreed not to proceed with the share transaction.
Danone, which owns 25 per cent of Yashili, has been trying to revive its struggling Dumex unit, once China’s top baby formula brand, after Dumex took a hard hit in sales from a 2013 food safety scare involving its key supplier the Fonterra cooperative in New Zealand.
In the wake of the incident, Dumex recalled thousands of units of its milk formula products across Asian markets. Although the scare turned out to be a false alarm, Dumex has been struggling to win back its lost market share in China.