Chinese dairy company Yashili has agreed to acquire the entire equity interest in infant formula business Oushi Mengniu from its parent company, Mengniu, for US$165 million.

 

Oushi Mengniu manufactures and markets milk powder products for adults and infant formula products, and is a wholly owned subsidiary of the Asian diary giant Mengniu. For the year ending December 31, 2014, the business reported sales of RMB 724 million (US$113 million) and a profit of RMB 79 million (US$12.4 million) – a dramatic turnaround after the business posted losses of RMB 28 million (US$4.4 million) in 2013 and RMB 237 million (US$37.1 million) in 2012.

 

Mengniu is currently the second largest dairy processor in China, and controls a 51.4% stake in Yashili. An additional 25% stake in Yashili is controlled by the French dairy giant, Danone.

 

After a period of due diligence and once the deal for Oushi Mengniu is completed, Yashili expects its share of China’s diary sector and infant formula segment to increase and its competition with its parent company to soften.