After Chunhua capital announced its US $2.2 billion acquisition of Mead Johnson’s business in China from Lijie, more details about the deal also surfaced.
Today, xiaoshidai contacted Chunhua capital and learned more about the group’s ideas for supporting Mead Johnson’s business development in China in the future. At the same time, the group also talked to xiaoshidai about the logic behind the deal and its judgment on the milk powder market.
In addition, xiaoshidai also received a letter from lijieshi to its employees, from which we learned that both sides had made a more detailed explanation on the team arrangement and future cooperation mode.
Now, let’s take a look.
Two months to win
Let’s start with “previously on.”.
Last weekend, the US Johnson parent company Lee Jimi announced that a final agreement was reached to sell the infant formula and child nutrition business in Chunhua capital to its business in China, including Chinese mainland, Taiwan and Hongkong, with a value of US $2 billion 200 million. The sale of assets includes production facilities in nimegen, the Netherlands and Guangzhou, China, as well as a perpetual exclusive license to use MJ and the brands of Lanzhen, birui and anerbao in Greater China.
In fact, it is a little surprising that Mead Johnson China will finally “flower” Chunhua capital. Because in the list of first round bidders reported by Peng Bo in May this year, Chunhua capital did not appear.
In fact, Chunhua capital’s move is quite rapid. Xiaoshidai learned that its team only started in-depth contact with Mead Johnson in April this year, and signed the agreement in June. According to the original media disclosure schedule, the deadline for the bidding is June 11.
It is reported that in this transaction, a number of domestic and foreign PE giants have participated in the bidding, including Carlyle, CITIC, DST, baring, Bain, Sequoia China, PAG, KKR, etc.
So why Chunhua? The answer may be related to its experience in dairy products and even big consumer retail.
Statistics show that consumer retail is Chunhua’s traditional advantage field, in which the company has rich experience in investment and service. The invested enterprises include offline enterprises such as Yum China and JUNLEBAO, as well as online giants such as Alibaba. Among them, with the investment in JUNLEBAO in 2019, Chunhua capital began to set foot in the infant formula industry. Hu Zuliu, its founder and chairman, said at the time that Chunhua was very optimistic about the development of China’s leading dairy enterprises.
In fact, in the eyes of the outside world, on one hand, JUNLEBAO, who announced last year that he would become a “global leading brand of infant milk powder” and emphasized the whole industry chain model, on the other hand, Mead Johnson, which has deep scientific research strength and strong brand foundation, considering the possible synergy effect of the two in the industry chain and channel, if the transaction is successfully completed, Chunhua capital’s future investment in milk powder is also quite imaginative.
Reasons for the move
Although it is not clear how Chunhua capital plans for its milk powder resources, it is certain that the investment giant regards China’s infant milk powder market as an ideal track.
Talking about the reasons for the acquisition of Mead Johnson China, Chunhua capital told xiaoshidai today that first, it is optimistic about the overall upward trend of the market“ China’s infant milk powder market is the world’s largest infant milk powder market, with a market scale of 150 billion yuan. According to the prediction of external institutions, China’s infant milk powder market will maintain an annual growth rate of 3% in the future. ” The company said.
Secondly, Mead Johnson’s market position and competitive advantage in China. Chunhua capital pointed out that in China’s infant milk powder market, Mead Johnson is at the forefront of foreign brands, and has strong brand assets. For example, the product matrix of special formula is rich, and the user base of brands such as Lanzhen is rising steadily. In addition, Mead Johnson has established its core competitiveness in R & D and medical channels.
Finally, in Chunhua capital’s view, this is a “rare unique spin off trading opportunity for the world’s leading infant formula brands”, and describes “the transaction has a clear development path and value creation potential”.
Chunhua capital’s analysis of xiaoshidai shows that foreign brand milk powder has encountered challenges from domestic brands in China in recent years, and it is urgent to solve the problems of channel sinking and digital transformation.
The future of China’s infant milk powder market is not import or domestic, but the quality itself, “and Mead Johnson has obvious advantages in technical ability, R & D, composition and quality.”.
Xiaoshidai learned from Chunhua capital that in the future, the company will support Mead Johnson from enterprise strategy, operation and management, channel expansion, digital marketing and other aspects, so as to make it go deeper into the Chinese market and localization, and enhance the market competitiveness of Mead Johnson.
Nutrition is still the core
In fact, based on the confidence in China’s milk powder market, Lijie did not withdraw completely this time. According to the transaction information, the company will still retain an 8% stake in the business.
In the latest employee letter from lexman Narasimhan, CEO of Lijie, xiaoshidai also stressed: “the nutrition business (Note: Mead Johnson’s sector) is still the core part of our strategy and the core of our goal. We see a lot of opportunities in the business and will continue to invest in it to achieve our strategic and financial objectives. “
Laxman Narasimhan, CEO of lijishi
At the same time, Narasimhan also praised the efforts of the Chinese team“ Our Chinese infant nutrition team has world-class employees. They have overcome major structural changes and unprecedented challenges, while successfully launching outstanding new products to the market. Thanks to their hard work, agility and concentration over the past four years, we are able to entrust our business to a good new owner today. “
According to its description in the letter, Mead Johnson China “is a strong business with good brand and market share, leading e-commerce ability, rich scientific achievements and successful R & D record”, which has brought a huge positive impact to Lijie.
For Chunhua capital, the buyer, Narasimhan said that the company has an in-depth understanding of China’s dairy industry and is committed to establishing a long-term partnership with Lijie to build the Mead Johnson brand.
Cooperation mode between the two sides
So, how will the two companies cooperate in the future?
As part of the deal, Chunhua capital will maintain a long-term cooperative relationship with lijishi in R & D and supply, according to another internal letter issued by Enda Ryan, senior vice president of lijishi’s health and nutrition division in Greater China. Chunhua capital has the right to choose to cooperate with Lijie on the global subversive scientific projects to carry out front-end innovation. The two sides will also maintain cooperation through long-term manufacturing and supply agreements.
“Chunhua Capital Group will work with the management to make full use of its resources and industry experience to promote the long-term growth of infant nutrition business in Greater China.” Ruienda said.
Enda Ryan, senior vice president, Greater China, health and nutrition division
It is worth noting that, according to the two sides in this email, Mead Johnson China is expected to continue to have the “original team” to operate.
First of all, ruienda, who represents rijkstra, disclosed in the letter: “according to the completion of the legal consultation procedure with the local Labor Committee of the Netherlands, and under the condition of meeting the relevant customary conditions, we expect that the vast majority of employees, including the nimegen factory, Guangzhou factory and R & D center, will move with the business.”
“Chunhua capital recognizes the strength of our team and is impressed by our recent progress in execution. Employees who are about to join Chunhua Capital Group will have the opportunity to carry on the past and forge ahead and participate in the next phase of Mead Johnson’s business growth. ” He said.
In addition, the new owner Chunhua capital also reported in the above email through ruienda that it is looking forward to “working side by side” with the Greater China infant nutrition team of Lijie in the future, and also looking forward to maintaining a close cooperative relationship with Lijie.
“We are full of confidence in the baby nutrition business in Greater China, and believe that this business contains significant investment opportunities and opportunities to accelerate growth. Moreover, we have considerable investment experience in China and rich local resource network, which can provide strong support for the development of this business in the next stage. ” Chunhua capital said in Lijie’s internal letter.