FDBusiness.com

Danone has formed a joint venture with COFCO, the State-owned largest food company in China. As part of the agreement COFCO has agreed to sell 148,014,022 shares in China Mengniu to the joint venture.

COFCO and Danone will own 51% and 49% respectively in the new joint venture. After the transaction, COFCO will continue to be the single largest shareholder in Mengniu. Danone will become a strategic shareholder in Mengniu, owning an indirect interest of approximately 4% at the initial stage, with an aim to increase the interest in Mengniu based on market conditions in the future.

In addition, Danone and Mengniu have agreed to establish a joint venture for the production and sales of chilled yogurt products in China. The combination will have net sales of about Eur500 million, with an estimated market share of around 21% and 13 factories across China. Danone will own 20% and Mengniu 80% of the new joint venture in China.

Franck Riboud, Danone, chairman and chief executive of Danone.

Danone will invest approximately Eur325 million as a result of the two co-operation projects. The co-operation will help Mengniu to leverage Danone’s leading product innovation and management capability in the fresh dairy category. Danone’s BIO (Activia) brand will put the new fresh dairy business in a solid position to build its strong leadership in the active health sector.

“Joining the strengths of Danone, COFCO and Mengniu will create the winning combination to unlock the potential of the fresh dairy products category in China,” says Franck Riboud, Danone, chairman and chief executive of Danone. “Backed by COFCO’s extensive expertise in the Chinese food industry and by Mengniu’s nation-wide leading platform in the dairy sector, our brands will benefit from significantly wider reach to the largest number of Chinese consumers.”

COFCO’s and Mengniu’s strategic partnership with Arla Foods is unaffected by the agreement.