February 13, 2014


Danone raises stake in China's leading dairy company Mengniu



France-based Danone SA announced an agreement, together with COFCO Dairy Investments, to raise its stake in China's leading dairy company - China Mengniu Dairy Ltd, from 4.0% to 9.9% at an investment of €486 million (US$665.08 million).


Danone and COFCO Dairy Investment, a venture with China's state-owned COFCO, will subscribe to a reserved rights issue by Mengniu at HKD42.5 (US$5.48) per share, a 15.3% premium to Mengniu's previous close. By 0701 GMT, the shares were trading up 3.1% at HK$38.00, while the benchmark Hang Seng index was up 1%.


This comes after the French company suffered a series of setbacks last year, including being fined for anti-competitive practices after a price-fixing probe. It also recalled infant formula products in Asia due to an unfounded health scare stemming from New Zealand-based supplier Fonterra Co-operative Group.


The transaction makes Danone, which will then hold 9.9% stake, the second largest shareholder in Mengniu, following COFCO, China's largest state-owned food company, with 16.3% and ahead of Dutch-based Arla, with 5.3% stake.


COFCO, Danone and Arla -Mengniu's three core shareholders - will combine their stakes within COFCO Dairy Investments, a jointly-owned company pooling all three shareholders' interests in the governance of Mengniu.


Danone formed an alliance with Mengniu in May 2013 to produce and sell chilled yoghurt products in China. Its first joint venture with China's largest beverage company, Hangzhou Wahaha Group Co, was dissolved 2009 after 13 years.


The transaction is subject to the approval of Mengniu's shareholders, and is expected to be finalised in the next few months.

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