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Danone reorganises Chinese assets, cuts ties with Mengniu

CNA – France’s Danone said on Friday it would end its partnership with Chinese milk firm Mengniu by selling a 25 per cent stake it holds in milk powder maker Yashili as well as a 20 per cent joint venture participation.

In return, Danone will acquire from Yashili 100 per cent of the Dumex Baby Food infant milk unit.

The different parts of the deal, which also includes a sale of a 20 per cent stake in the Inner Mongolia Diary Joint Venture, will not need to close at the same time.

“It is expected that the earliest closing could take place this year,” Danone said in a statement, adding: “The completion of these transactions will lead to the conclusion of the partnership Danone held with Mengniu over the last few years.”

Danone acquired the stake in Yashili, a company controlled by Mengniu in 2014 as it sought to step up its presence in the country’s billion-dollar milk market in a deal worth USD550 million.

Company logos are seen on products displayed before French food group Danone 2019 annual results presentation in Paris. PHOTO: CNA

Since then, Yahili’s shares have lost around 70 per cent of their value, Refinitiv data showed.

The French yoghurt maker last year already shed its 9.8 per cent minority stake in Mengniu, then worth USD2 billion, and pledged to distribute the proceeds to investors as it came under pressure to boost its shareholder value.

“China remains highly strategic for Danone, and today’s announcement will notably allow the company to further expand its ability to locally manufacture Infant Milk Formula products,” Danone said on Friday.

Danone CEO Antoine de Saint-Affrique said in April that it was part of his plan aimed at boosting revenue growth to dispose of underperforming assets.

The company last week said it would sell a minority stake in an Argentinian water business.

The cash generated from the latest divestment – for which no figure was given – will be used to pay back debt, Danone said.