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Fonterra to buy 20% of China鈥檚 Beingmate, mulls joint venture
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NEW Zealand’s dairy giant Fonterra Cooperative Group Limited said it is to spend NZ$615 million (US$515 million) to form a partnership with Chinese infant food manufacturer Beingmate to tap growing demand for high-end dairy products in China.
Fonterra will make a tender offer to gain up to 20 percent stake in Beingmate at 18 yuan apiece, according to a joint statement issued today.
After completing the tender offer and gaining regulatory approval for the stake purchasing, the two companies will set up a joint venture to purchase Fonterra’s Darnum plant in Australia and as well as establish a distribution agreement to sell Fonterra’s Anmum brand products in China.
Beingmate will own 51 percent of the joint venture to meet Chinese regulatory requirements.
“By working together with Beingmate, we will strengthen our infant formula brand presence in China and link China to high quality ingredients from New Zealand, high value paediatric products made at Darnum in Australia," Fonterra chief executive officer Theo Spierings said in the statement.
Demand for high-quality dairy products has been rising in China over the past few years partly due to a series of food safety scandals. The Chinese government has also been eliminating outdated and smaller-sized dairy farms to ensure quality and lift supply.
Rising income of lower-tier city residents and the urbanization process also means a growing appetite for cheese, milk formula and other dairy products, as China’s average consumption of dairy products is still low compared with developed nations.
The size of China’s milk formula market jumped 21 percent to 91.2 billion yuan (US$14.7 billion) last year, according to market research firm Euromonitor International.
Fonterra said that the purpose of the proposed joint venture will be to manufacture nutritional powder, including infant formula and other nutritional milk powder, at Darnum, and will prioritize supply to the Chinese market.
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