Just now, China Mengniu Dairy Co., Ltd. (hereinafter referred to as Mengniu) issued an announcement to disclose the specific arrangement for Danone’s equity in the company reached by Danone S.A. and COFCO dairy Investment Co., Ltd. (hereinafter referred to as COFCO dairy investment).
According to the announcement, this means that Mengniu “two shareholders” Danone plans to reduce its holdings.
Reduction of Mengniu’s “two shareholders”
“The board of directors of the company has been informed that as part of Danone’s ongoing portfolio review, Danone has reached an agreement with COFCO dairy investment to convert the company’s equity indirectly held by Danone through COFCO dairy investment into the company’s equity directly held by Danone.” Mengniu said in the announcement.
According to the announcement, COFCO dairy investment holds about 31.25% of the equity of Mengniu. “The above conversion is subject to regulatory approval. Once completed, Danone expects to hold about 9.82% of the company’s direct equity, while COFCO dairy’s equity investment in the company will be reduced to about 21.43%.” Mengniu said. It is worth noting that Mengniu pointed out in the announcement that the board of directors was also informed that Danone was considering reducing its shares in the company in the next step.
“The board of directors understands and respects the above equity structure arrangements made by Danone for its own needs.” Mengniu said COFCO dairy investment, which is controlled by COFCO group and invested by Arla foods AMBA Arla, would remain the largest single shareholder of Mengniu. Today, Mengniu told xiaoshidai that it understands the relevant equity arrangement of Danone. “Mengniu’s existing strategic shareholder structure, business development and established strategy will not be affected. COFCO will remain the largest shareholder of Mengniu and firmly support the management and team of Mengniu. ” The company said.
In addition, Mengniu stressed that its future business strategy and plan will not be changed due to the above arrangement of Danone, and it will more efficiently implement the development plan for the next five years, so as to achieve the strategic goal of “creating a new Mengniu in five years” in 2025.
As for whether there will be any changes in the joint venture between the two sides, Mengniu said that “everything is subject to the announcement”.
The funds are used to buy back Danone shares
Today, Danone said in a circular that the move is part of the company’s ongoing portfolio evaluation and is also the “first step” for Danone to dispose of Mengniu’s equity.
Danone said it would spin off Mengniu’s shareholding through one or more transactions in 2021 according to market conditions. At present, Danone’s indirect holding stock market value in Mengniu is about 850 million euros, and contributed 57 million euros of recurrent income in 2019 through associated companies. Danone stressed today that the Chinese market is still of great strategic value to Danone and continues to fulfill its commitment to this market through its categories, operations and employees in China.
So why did Danone make such an arrangement? Xiaoshidai noted that Danone said today that most of the proceeds from the sale of Mengniu’s shares will be used to buy back Danone’s shares and give back to investors. Although the incident happened suddenly, Danone’s action has its own traces to follow. According to xiaoshidai, Emmanuel Faber, chairman and chief executive of Danone, said after the company released its 2020 performance report on February 19, “Danone’s share price is not the level we want.” Danone’s share price fell 27% last year, according to the company. According to the Financial Times report at that time, Danone’s performance in 2020 was roughly in line with expectations, but its share price was at a seven-year low. “I realize that this is not an easy time for our shareholders,” fan told the financial times. We attach great importance to the decline of stock prices. ” At the same time, he also countered the doubts of radical investors, saying that 70% of the company’s business gained or increased market share during his term of office.
Xiaoshidai said that since the end of last year, radical investors in three institutions have called for Danone to change. Among them, the proposal of separating CEO and chairman posts has aroused great concern. In the above interview, fan Yimou declined to comment on the proposal or whether he is the right person to lead Danone through its transformation plan.
In order to adapt to the “epidemic new world” and return to the growth track as soon as possible, Danone announced three major decisions in October last year, including reshaping the organization, strengthening the executive power and reviewing the portfolio strategy. Subsequently, Danone released a new “local priority” strategic plan.
This year, Danone’s move to reduce its holdings of Mengniu and use the funds to buy back its own shares has also aroused widespread concern of foreign power.
Today, the Financial Times quoted sources as saying that the divestiture is expected to raise about 1 billion euros for Danone. The financial times pointed out that this announcement is the first in a series of asset disposals committed by Danone to radical investors. Danone is still evaluating its Argentina business and Vega brand.
The measures announced today are part of Danone’s commitment to achieve portfolio optimization and improve shareholder returns by optimizing asset allocation, the CFO of Danone said in an e-mail to the agency today, according to Peng Bo today.
As Danone’s share price fell, it lost about a quarter of its market value last year, according to an analysis by Peng Bo, which gave the pressure of radical investors a chance to take advantage of and made the CEO closely watched by the outside world. The former called for the separation of the chairman and CEO positions.
Photo: Emmanuel Faber, chairman and CEO of Danone
Reuters today quoted French media as saying that members of Danone’s board of directors will meet today to discuss Danone’s corporate governance.
Figaro today quoted a source close to the CEO of Danone as saying that only a few of the members of the board of directors want to adjust the selection of CEO, while not most of them want to separate the chairman and CEO in the short term. The consideration also includes timing.
However, some analysts previously believed that at the annual general meeting of Danone held in April, six of the 16 directors on Danone’s board of directors will have their terms expired. If some changes are not made, investors may not be satisfied with the board of directors. In addition, Figaro reported that the former chairman of Danone, who still has the right to vote on the board, also had some influence on the incident.
Link: according to the “hand in hand” process of the two sides, Danone’s first share in Mengniu occurred in 2013. In May 2013, Mengniu announced that COFCO group and Danone, a multinational food giant, had signed an agreement to become a strategic shareholder of Mengniu by holding 4% of the shares of Mengniu Dairy through a joint venture with COFCO, and planned to increase the shares of Mengniu in the future according to market progress. According to the above agreement, COFCO and Danone jointly set up a joint venture company. COFCO agreed to transfer Mengniu shares to the joint venture company and introduce Danone’s yogurt technology and brand management experience. COFCO shares 51% and Danone shares 49% of the newly established joint venture. With Danone’s shares in Mengniu, Danone China’s yogurt business and Mengniu’s yogurt business merged, and the two sides set up a new joint venture to engage in yogurt production and sales. For the above two cooperation agreements, Danone’s total investment is about 2.6 billion yuan. In fact, as early as 2006, Mengniu decided to “get married” with Danone and start cooperation in the yogurt business. However, the cooperation was terminated one year later. It is said that the reason is that “the external cooperation conditions in some aspects were not mature” at that time. In February 2014, Mengniu and Danone announced once again that they had signed a subscription agreement. Mengniu issued additional shares equivalent to 6.6% of its total share capital to Danone, and the total amount of capital involved in the transaction was about HK $5.153 billion. After the placement, Danone’s share capital of Mengniu increased from 4.0% to 9.9% after expansion. So far, Danone officially surpassed Arla foods and became the largest foreign shareholder of Mengniu. In addition to the yogurt business, Mengniu and Danone also cooperate in the plant-based business. In July 2016, Danone disclosed its acquisition of Baibo company, an American plant-based food manufacturer, with nearly US $12.5 billion. In 2014, Baibo started a strategic cooperation with Mengniu and established a joint venture to operate the “Zhipu mill” brand and launched two series of plant beverage products, walnut and almond. However, in 2019, there was news of the adjustment of Zhipu mill in China. The company said at that time that it “decided to adjust its business development strategy to ensure the better development of the company”. Lu Minfang, President of Mengniu Group, said last year that he would not give up plant-based products, but would increase investment to develop the next generation of plant-based products.