Danone acquires 25% stake in Yashili for €437m

Danone is to acquire a 25% stake in Chinese infant milk company Yashili international holdings for €437m ($550m).

After completion of the deal, Mengniu will now only hold 51% of equity interest in the company having previously owned 68%.

Danone will buy the shares at a price of HK$3.70 per share.

Though this alliance, Danone and Mengniu will leverage Danone’s technology and know-how in the infant milk formula (IMF) industry and Mengniu’s market experience in the PRC to grow Yashili and develop a wide range of products that meet stringent standards in the category in China.

The company stated that Danone, Mengniu and Yashili will also look into the possibility of a minority equity investment by Yashili in Danone’s subsidiary Dumex China.

As part of the deal, Danone will recommend candidates for Yahili’s CEO position.

Speaking about the alliance, Danone CEO Emmanuel Faber said: "Building on our successful cooperation in fresh dairy products, we are strengthening the winning team formed by Danone and Mengniu by acquiring an equity stake in Yashili, combining Mengniu’s wide-reaching network in China with Danone’s international expertise in infant milk products.

"I am delighted with this transaction and am confident in our ability to grow all of our brands in the Chinese market."

Mengniu produces dairy products such as UHT milk, milk beverages and yogurt, ice cream, milk formula and other dairy products such as cheese. In 2014, the company’s annual production capacity reached 8.04 million tonnes.

Mengniu CEO and chairman of Yashili Elaine Sun further added: "I am very pleased with this new agreement with Danone, which will facilitate Yashili’s expansion in the promising Chinese market for infant milk formula and create new opportunities for the future, offering consumers a wider choice of products that are safe, healthy and of the very highest quality."

The acquisition is subject to the approval of the company’s shareholders and is expected to be finalised in the next few months.

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Image: Danone will acquire 25% of Yashili’s shares. Photo: courtesy of Naypong / freedigitalphotos.net.