New Zealand-based Fonterra, the world's largest dairy exporter, announced today it had submitted a RMB 18.00 per share partial tender offer to the Shenzhen Stock Exchange to acquire up 205.4m shares (20%) of Beingmate Baby & Child Food Company.
At this premium, a 20% stake in Beingmate will set Fonterra back around RMB 3.68tn (US$589m, €519m).
Shares in Beingmate jumped to RMB 17.15 (US$2.75, €2.42) on news of the offer.
The offer is open for 30 days, from February 12 to March 13.
Fonterra expects to announce the result of the partial tender offer on March 18.
"Growing demand for infant formula"
Beingmate and Fonterra signed a partnership agreement in August 2014 that, if approved by Chinese and Australian regulators, would see them establish a joint venture to purchase a Fonterra plant in Darnum, Australia, and Fonterra acquire a 20% stake in Beingmate.
Infant formula and nutritional milk powder produced at Darnum would be shipped to China, where Beingmate would act as the executive distributor of Fonterra infant formula, Anmum.
The partnership was granted foreign investment approval by the Chinese Ministry of Commerce in January 2015.
"Further regulatory approvals", which have seemingly been granted, were required before Fonterra proceeded with its partial tender offer.
If the partial tender offer is "satisfactorily" completed, Fonterra and Beingmate will move ahead with their Darnum joint venture, in which they will hold respective 49% and 51% stakes.
Fonterra today reiterated that its partnership with Beingmate would "help meet China's growing demand for infant formula."
“The partnership will create a fully integrated global supply chain from the farm gate direct to China’s consumers, using Fonterra’s milk pools and manufacturing sites in New Zealand, Australia, and Europe," it said in a statement.
“It is intended to increase the volume and value of Fonterra’s ingredients and branded products exported to China.”
Investor reaction
Beingmate shareholder reaction to Fonterra's offer - gleaned from an interactive forum for investors - has been mixed.
Citing the 2013 botulism scare, one commented that Fonterra "is not a good class."
Another, more optimistic, investor wrote: "I hope the cooperation between the company and Fonterra will be very successful."