New Zealand’s Fonterra Co-operative Group Ltd acquired an 18.8% stake in China’s Beingmate Baby and Child Food Co. Ltd for $553 million. The stake falls just short of the original target of 20% announced last August.
Fonterra is looking to raise its presence in China’s branded dairy industry. The country is a key market, as it imports 25% of New Zealand’s total dairy export to meet demand, particularly for infant formula by the country’s middle class.
Fonterra paid well for the increased presence in China’s $18 billion dairy market, paying 18 yuan per share – a 1.7% premium over Beingmate’s trading price of 17.68 yuan per share on Monday and at the top end of the company’s year average of between 12 and 18 yuan.
At the same time as Fonterra’s investment, many global players are also investing in the sector, and Chinese demand for dairy is expected to soften. Fonterra has lowered its forecast for Chinese demand to ease as consumption is forecast to increase 4% per year through 2020 – down from a previous forecast of 7% per year.
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