A technician tests a dairy product of Yili Industrial Group Co at the company's innovation lab in Hohhot, capital of the Inner Mongolia automous region. XINHUA
Dairy giant plans to spend $850 million on purchase of 100 percent stake in Stonyfield
China's biggest dairy producer Yili Industrial Group Co has shown its ambition to consolidate its position and expand its production line with its latest overseas acquisition plans.
Yili announced on Wednesday night that it will bid for a 100 percent stake in leading US organic yogurt brand Stonyfield, which is currently owned by French dairy giant Danone. The acquisition will total $850 million, according to Yili.
Fully acquired by Danone in 2014, Stonyfield had an annual sales revenue of $370 million in 2016, with net profit to $50 million. Its production line covers yogurts, smoothies, milk and cream. Danone plans to sell off Stonyfield in order to accelerate the closure of its $10.4 billion acquisition of natural food company WhiteWave.
Yili is likely to confront strong competitors such as PepsiCo and Coca-Cola, according to Credit-Suisse analyst Laurent Grandet.
Xu Ke, vice-president of Yili Group, said that the whole bidding process is quite complicated and it is yet unknown when the result will be announced.
The capital market has responded positively to Yili's acquisition plan. Yili's price went up 0.92 percent on Thursday to close at 17.58 yuan ($2.54) per share, while the benchmark Shanghai Composite Index went up 0.29 percent.
Industry insiders consider Yili's intended acquisition of Stonyfield reflects Chinese dairy makers' growing interest in the low-temperature dairy products market. According to the Dairy Association of China, the country's low-temperature dairy product industry, especially pasteurized milk, grew by over 20 percent annually in the past three years.
Independent dairy analyst Song Liang predicted that low-temperature dairy products will continue to register the fastest pace of growth in 2017 as they will become consumers' favorite in first and second-tier cities, gradually replacing ultra-high-temperature dairy products.
Yili's resolve to expand its production line has been quite evident recently. Last October, it announced plans to acquire a 37 percent stake in organic milk producer Inner Mongolia Shengmu Animal Husbandry Co Ltd for 4.6 billion yuan. However, the acquisition plan ended on April 28 after the two companies failed to reach all the preconditions by the due date.