Groupe Danone to acquire 4% indirect stake in China Mengniu Dairy

French dairy major Groupe Danone today agreed to buy a strategic indirect 4 per cent stake worth about $417 million (€325 million) in China Mengniu Dairy Co Ltd.

Danone, the world's largest yogurt maker and China state-owned COFCO, the country's largest food company will form a joint-venture with COFCO selling 148,014,022 shares in Hong-Kong listed Mengniu Dairy to the JV.

COFCO and Danone will own 51 per cent and 49 per cent respectively in the newly formed company. Post closing, COFCO will continue to be the single largest shareholder in Mengniu Dairy - one of China's largest dairy producers.

Danone will become a strategic shareholder in Mengniu Dairy, owning an indirect 4 per cent stake at the initial stage, and raise its holding in the future.

In addition, Danone and Mengniu Diary have signed a framework agreement to establish 20:80 per cent JV for the production and sale of chilled yogurt products in China by combining their 13 plants across the country.

The combined 2012 sales in the chilled yogurt products business was around €500 million, and holds around 21 per cent market share.

The Paris-based company said that this JV will benefit from the Danone and Mengniu Diary brands and will achieve synergies by introducing its own worldwide expertise in quality and product innovation, while fully leveraging Mengniu Diary's leadership and distribution capability in China's yogurt category.

Danone said that it will invest around €325 million in the two deals.

''COFCO welcomes Danone. As the largest state owned company in the food sector, COFCO has the responsibility to further develop dairy products in China. I hope COFCO and Danone will take today's cooperation in dairy sector as a starting point, and explore more cooperation opportunities in the future by leveraging respective advantages in marketing, channels, product and management, in order to jointly develop the Chinese market,'' said Frank Ning, chairman of COFCO.

''Joining the strengths of Danone, COFCO and Mengniu will create the winning combination to unlock the potential of the Fresh Dairy Products category in China. Backed by COFCO's extensive expertise in the Chinese food industry and by Mengniu's nation-wide leading platform in the Dairy sector, our brands will benefit from significantly wider reach to the largest number of Chinese consumers'', said Franck Riboud, Danone chairman and CEO.