March 27, 2018

Friesland Campina takes full control of joint venture with China Huishan Dairy

Friesland Huishan Dairy - a joint venture between Friesland Campina and China Huishan Dairy - will be owned completely by the former after the company acquired a remaining 50% stake in China Huishan Dairy Investments (Hong Kong),  South China Morning Post reported.

The transaction officially ends Friesland Campina's partnership with the Chinese dairy company, which was severely impacted by its own financial woes. Husihan's problems first came to light when short-seller Muddy Waters expressed concerns over its "inflated earnings" and claimed that the company was worth "close to zero" back in December 2016. 

Months following that disclosure, Huishan's shares plummeted 85% in 90 minutes before trading ceased.

In the aftermath of the fiasco, Friesland Campina stated in a 2017 financial report that the financial problems of China Huishan Dairy derailed Friesland Huishan Dairy's development. As a result, utilisation of the joint venture was curtailed, with the implementation of its business plan delayed.

The development led to the "impairment of property, plant and equipment of EUR36 million (US$44 million)," Friesland Campina added.

By buying the 50% stake in China Huishan Dairy Investments, the Dutch company was able to take control of the joint venture for around US$2 million in mid-February.

Shen Meng, executive director with investment bank Chanson & Co., commented that Friesland Huishan Dairy was mainly headed by Friesland Campina while Huishan simply provided local resources. 

"China now is going through many profound changes. Foreign firms can no longer follow the old path of collaborating with Chinese companies; they have to find a new way," he added.

In 2015, Friesland Campina bought a 1.1% stake in China Huishan Dairy Holdings, which culminated in the joint venture that oversaw the production and marketing of the Dutch Lady brand in China.

Sales of the products were reportedly "beyond expectations" as Friesland Campina's Chinese business achieved "double-digit" growth, according to then CEO Roelof Joosten. 

- South China Morning Post