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China Mengniu Dairy to buy Yashili for $1.6 billion

Staff writer |
China Mengniu Dairy has offered to acquire Yashili International Holdings in a deal valued at about $1.6 billion. The acquisition would be the largest deal in the Chinese dairy industry.

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For each Yashili International Holdings share, a Yashili shareholder will have a choice of either accepting HK$3.50 in cash; or HK$2.82 in cash and 0.681 share in a private company set up by Mengniu for the sole purpose of holding shares in Yashili (SPV Shares).

The price of HK$3.50 per share represents a premium of approximately 9.4% over the closing price of HK$3.20 per share on the last trading date prior to the stock suspension on 13 June 2013. The SPV shares will be subject to a three year lock up period and attached certain repurchase option rights.

Mengniu intends to finance the entire total consideration from external financing. The general offer is subject to customary conditions and Mengniu's shareholders approval. Following completion of the transaction, it is intended that Zhang International will retain 10% attributable interest in Yashili.

"We are pleased to be the controlling shareholder of Yashili. With the huge room for growth in China’s pediatric milk formula market, the partnership with Yashili, one of the most successful milk powder brands in China, will greatly strengthen both companies' business platform to offer consumers with more choices in dairy products that are safe, healthy and of highest quality," said Sun Yiping, chief executive officer of Mengniu.

China Mengniu Dairy is a biggest dairy product manufacturer in China. It has awarded "The Asset Triple A Award - 2012 China’s Most Promising Companies" by The Asset magazine, under the Industry Leaders category.

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