China’s Yili scraps 4.6bn yuan milk deal after failure to get regulatory approval
Takeover offer made amid keen competition among mainland Chinese milk producers to capture more of the premium segment
Inner Mongolia Yili Industrial Group has scrapped a 4.6 billion yuan (US$667 million) takeover of Hong Kong-listed China Shengmu Organic Milk because it failed to get regulatory approval, according to a Hong Kong stock exchange filing on Friday.
Shanghai-listed Yili, China’s leading milk producer, also said it would not proceed with its plan to raise up to 9 billion yuan in a private placement to finance the deal after the offer collapsed.
Yili’s shares closed 3.85 per cent lower at 18.23 yuan in Shanghai, while Shengmu fell by 16.4 per cent to HK$1.63 in Hong Kong on Friday after it resumed trading. Both companies have been suspended from trading since Monday pending the announcement.
In October Yili, via a subsidiary company, announced plans to purchase a 37 per cent stake in Shengmu, the largest producer of hormone-free dairy products in China which meet the European standards for organic milk.
The takeover offer was made when there was keen competition among mainland Chinese milk producers to capture more of the premium market segment amid a shift to high end products and more healthy food by the rising Chinese middle class.
The deal needed approval from Beijing’s Anti-Monopoly Bureau in order to proceed by the deadline of April 21.