June 13, 2007
China's New Hope Group builds up stake in Shuangfeng Dairy Company
In a June-9 company release, New Hope Group announced that its wholly-owned subsidiary, New Hope Dairy Company, will be acquiring a 25.2 percent stake in Shuangfeng Dairy Company from Hangzhou's Sijiqing Dairy Products Company. Established in 2002, Hangzhou-based Shuangfeng is a joint-venture company of New Hope and Sijiqing. This share transfer exercise will cost New Hope some RMB11.02 million.
Earlier, as part of efforts to streamline its operations, the New Hope Group had sold its 85-percent stake in Changchun New Hope Dairy Company to Jilin's Guangze Group Co Ltd for RMB7 million. In 2005 and 2006, Changchun New Hope Dairy Company had accumulated losses amounting to RMB5.1 million and RMB7.21 million respectively. In Jan-Apr 2007, losses further widened to more than RMB14 million.
Market participants mentioned that New Hope Group had sold this asset as excessive competition had affected the Group's operations. Guangze Group has a strong presence in the dairy and milk products market in Jilin province.
In 2002, New Hope had embarked on an aggressive RMB1.3-billion acquisition trail in its bid to establish a solid footing in the country's growing dairy market. However, some market participants noted that the company's resources may have been overstretched. New Hope may be trying to do too much within too short a time frame.
RMB1=US$0.1308 (Jun 13)