Formula for success

28 August 2014 By Ethan Bilby

Buying a stake in baby food group Beingmate at a 25 percent premium is brave for the New Zealand dairy co-op, whose ex-partner Sanlu sold tainted milk in 2008. Focusing the tie-up on products made outside China is wise. But rising scrutiny of foreign companies ups the stakes.

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New Zealand dairy cooperative Fonterra said on Aug. 27 that it would buy up to 20 percent of Chinese baby food and formula maker Beingmate Baby and Child Food for 18 yuan per share. That suggests a 25 percent premium to the last trading price on June 18, before the Shenzhen-listed group’s shares were halted.

The deal would value a 20 percent stake in Beingmate at 3.67 billion yuan ($600 million), based on the 1.02 billion shares outstanding according to Eikon. Fonterra is using debt to buy existing shares of the group.

Fonterra said it would set up a joint venture with the Chinese group in Australia to operate a plant where Beingmate would have access to local milk to produce its own brand products. The New Zealand group said its total investment, after selling a 51 percent stake in the Australian plant, would be NZ$615 million ($515 million).

Through their partnership, Beingmate has agreed to distribute Fonterra’s New Zealand-made Anmum baby milk powder in China.

China Mengniu Dairy said on Aug. 28 that revenue for the six months ending June rose 25 percent year on year to approximately 25.8 billion yuan ($4.2 billion). French dairy giant Danone said in February it would raise its stake in Mengniu to 9.9 percent.

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Through their partnership, Beingmate has agreed to distribute Fonterra’s New Zealand-made Anmum baby milk powder in China.

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