New Zealand’s Fonterra to take stake in China’s Beingmate
27 Aug 2014
New Zealand's Fonterra today said it would take a stake in Chinese baby food and formula maker Beingmate Baby and Child Food Co Ltd.
This is Fonterra's first tie-up with a Chinese processor since its involvement in a tainted infant formula scandal in 2008 (See: China bans New Zealand milk powder on fears of botulism contamination).
Fonterra's stake acquisition in the two Chinese companies is a a continuation of the trend of foreign dairy producers partnering with established Chinese players in a bid to increase market share in China's fast-growing dairy market.
French dairy giant Danone SA in February paid $665 million to hike its stake in China Mengniu Dairy Co Ltd.
According to Fonterra Cooperative Group Ltd, the world's largest dairy exporter, it would take a stake of up to 20 per cent in Beingmate China's biggest maker of infant milk formula, at 18 yuan per share, a 25 per cent premium to the stock's last closing price.
Fonterra added its total investment in the partnership worked out to around $514 million, including proceeds from the sale of a stake to Beingmate, in an Australian plant.
It added, it would invest around $463 million to boost dairy processing capacity in New Zealand.
Chief executive Theo Spierings said Fonterra, which was involved in the botulism scare last year, would spend about NZ$615 million ($514 million) for the stake.
The companies would then form a joint venture to sell Fonterra's premium Anmum baby formula brand in China.
New Zealand already exported the baby formula worth around $3.0 billion a year to China, sourced mainly from Fonterra.
He added the infant formula market in China was worth about NZ$18 billion today and was expected to be worth NZ$33 billion by 2017.
He added, the growth was driven by increasing urbanisation, higher disposable incomes, a preference for premium brands and the relaxation of the one-child policy.
According to Fonterra, it would also invest NZ$555 million in new dairy processing facilities in New Zealand, boosting capacity to help meet burgeoning global demand.