Danone and Mengniu expand alliance for infant milk formula in China

Danone is to subscribe to a private placement by Yashili, one of China’s leading infant milk companies. Upon completion, Yashili’s majority shareholder Mengniu will hold a 51.0% equity interest and Danone will hold 25.0%.

Danone and Mengniu want to use this expanded alliance to grow Yashili and develop a wide range of products that meet the very highest standards in this category.

Through their alliance, Danone, Mengniu and Yashili intend to expand and strengthen their cooperation in the infant milk formula (IMF) business in the People’s Republic of China (PRC). The parties will study the possibility of a minority equity investment by Yashili in Danone’s subsidiary Dumex China.

Danone, Mengniu and Yashili today announced that they have signed an agreement allowing Danone to take part in a private placement by Yashili totaling €437m, at a price of HK$3.70 per share. The transaction will give Danone an equity stake of 25.0% in Yashili, which is one of the People’s Republic of China’s main infant milk companies. As part of this agreement, Danone will recommend candidates to serve as Yashili’s CEO.

Through this alliance, Danone, Mengniu and Yashili intend to expand and strengthen their cooperation in the infant milk formula (IMF) business in the People’s Republic of China (PRC). The parties will study the possibility of an equity investment in Danone’s subsidiary Dumex China with a comparable minority stake.

This transaction extends the scope of the strategic alliance in fresh dairy products first established in 2013 between Mengniu, Danone and COFCO, China’s leading state-owned company in the food sector.

Through this new expanded alliance, Danone and Mengniu will leverage Danone’s world-leading technology and know-how in the IMF industry and Mengniu’s market experience in the PRC to grow Yashili and develop a wide range of products that meet the very highest standards in the category.

Emmanuel Faber, Danone CEO, said: “Building on our successful cooperation in fresh dairy products, we are today strengthening the winning team formed by Danone and Mengniu by acquiring an equity stake in Yashili—combining Mengniu’s wide-reaching network in China with Danone’s international expertise in infant milk products. I am delighted with this transaction and am confident in our ability to grow all of our brands in the Chinese market.”

Elaine Sun, CEO of Mengniu and chairman of Yashili, said: “I am very pleased with this new agreement with Danone, which will facilitate Yashili’s expansion in the promising Chinese market for infant milk formula and create new opportunities for the future, offering consumers a wider choice of products that are safe, healthy and of the very highest quality.”

Frank Ning, chairman of the board of Mengniu and chairman of COFCO, said: “I am very happy to enter this new stage in our cooperation with Danone and Mengniu. This transaction reflects our commitment to working together to grow key product categories for Chinese consumers.”

Danone’s acquisition of an equity stake in Yashili is subject to the approval of the company’s shareholders at their Extraordinary General Meeting and of the relevant authorities. It is expected to be finalised in coming months.