12 June 2018

Danone Adds to Investment in NZ Infant Formula

News

June 12 (BusinessDesk) - Danone plans to increase its investment in New Zealand infant formula manufacturing by acquiring up to 49 percent of Yashili New Zealand Dairy Co, the local unit of China Mengniu Dairy, according to a filing in Hong Kong.

Terms of the transaction haven't been finalised, including the price and method of payment, Yashili International said in a statement to the Hong Kong stock exchange. "The consideration, the payment method and the payment schedule shall be determined after arm's length negotiations and mutual agreement between the parties," it said in a statement to the Hong Kong stock exchange.

Danone already trades with Yashili and has an existing ownership interest via the quarter stake in Yashili International it acquired in 2014. Yashili NZ agreed to supply base powder dairy products to Danone in the second half of 2016.

Yashili NZ was established in 2012 and invested $220 million in a dairy plant in Pokeno capable of producing 52,000 tonnes a year of infant formula. Danone's existing operations in New Zealand include its Danone Nutricia infant formula business which posted a 9.5 percent gain in sales last year to $368 million. Its Nutricia Ltd medical nutrition business in New Zealand saw 2017 sales fall 7.5 percent to $103.6 million.

Danone and Yashili have signed a memorandum of understanding to execute the transaction but says that document doesn't amount to a legally binding commitment. The announcement refers back to a company statement from May 23 regarding "a disposal of a non-controlling interest in certain factory assets to a connected person of the company."

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