After years of marriage, Mengniu and Danone finally decided to embark on a new journey.
, centralized:
- Danone plans to sell the 20% equity of the low-temperature business joint venture held by Mengniu with a maximum of RMB 1.6 billion;
- Danone sold its 25% stake in Yashili to Mengniu for HK $1.423 billion, and Mengniu launched a proposal to privatize Yashili;
- Danone bought all the shares of Domex China from Yashili at the price of 870 million yuan.
At almost the same time, Danone also issued an announcement to disclose that it agreed to sell all its 25% equity of Yashili and all 20% shares in the joint venture with Mengniu to Mengniu, and will acquire 100% equity of Domex from Yashili, and the expected income will be used to further reduce Danone’s leverage.
The above series of transactions also means that all existing relations between Mengniu and Danone will be completely dissolved, and Danone will re embrace its “abandoned” Domex assets in China for seven years. Let’s see the details below.
Three transactions
According to the above joint announcement of Mengniu and Yashili, after Danone sold its shares in Mengniu in May last year, as of yesterday’s announcement, the relationship between Mengniu and Danone was as follows:
- Danone Shanghai, a wholly-owned subsidiary of Danone, holds 20% of the equity of each low-temperature business joint venture, and the remaining 80% of the equity is owned by Mengniu and / or Inner Mongolia Mengniu;
- Danone nutrition, a wholly-owned subsidiary of Danone, is the beneficial owner of 25% of Yashili’s issued share capital, and Mengniu is the beneficial owner of about 51% of Yashili’s issued share capital through Mengniu International;
- Yashili Guangdong, a subsidiary of Yashili, is the 100% beneficial owner of Domex China. Domex China was sold to Yashili Guangdong by Danone APAC, a wholly-owned subsidiary of Danone in May 2016.
After the sale of Danone Mengniu, Mengniu and Danone agreed to terminate the above existing relationship.
According to the announcement of Mengniu, the price for Mengniu to acquire 20% equity of the joint venture with Danone low temperature business is no more than RMB 1.6 billion, and the transaction must be approved by the State Administration of market supervision and administration.
It is reported that the acquisition of the remaining 20% equity of the low-temperature business joint venture will provide Mengniu with greater flexibility in business management and resource allocation without considering the interests of minority shareholders
In addition, Yashili sold Dumex China business to Danone at a total price of 870 million yuan (on a cash free and debt free basis). The preconditions for the transaction include the approval of antitrust review and the approval of shareholders at Yashili’s first extraordinary general meeting.
Mengniu announcement disclosed that according to the consolidated financial statements of Domex China, its pre tax and after tax profits for the year ended December 31, 2021 were 20 million yuan and 12 million yuan respectively, and its unaudited net asset value was – 11 million yuan.
Mengniu announcement also pointed out that the Domex China sale is a timely transaction, “enabling Mengniu and Yashili to reallocate resources and invest in other business opportunities with better synergy”.
Danone described in the announcement that the Chinese market is still of high strategic significance to Danone. “The transaction (to buy Domex China) will enable the company to significantly expand its ability to produce infant formula products locally”.
Xiaoshidai noted that the preconditions of the transaction also include Domex China obtaining new registration certificates from the competent government departments for the two formula products according to the new national standards. This shows that the new national standard of Chinese milk powder and the imminent implementation of the secondary formula registration system are the “biggest driving force” for Danone to choose to re embrace Domex.
As for the third transaction, the total price for Mengniu to buy back 25% equity of Yashili from Danone is HK $1423 million, equivalent to HK $1.20 per Yashili share, which is paid by Mengniu in cash. According to publicly available information, the original cost of Danone nutrition’s acquisition of Yashili equity was about HK $4.390 billion.
“As far as Mengniu and Yashili are concerned, the privatization proposal will promote the more efficient and long-term development of Yashili group, improve corporate governance and solve the potential competition between Mengniu and Yashili.” Mengniu said in the announcement.
If the privatization proposal is approved and implemented, Yashili’s planned shares will be cancelled in exchange for HK $1.20 per planned share, and Yashili’s listing status on the stock exchange will be revoked,
Danone said in the announcement that the transactions in the above proposals do not need to be completed at the same time. After the conditions of each proposed transaction are reached or exempted, the delivery is expected to be completed as early as this year. “Following Danone’s sale of a 9.8% minority stake in Mengniu in 2021, the completion of the above transaction will end the conclusion of the partnership between Danone and Mengniu over the past few years.”
Why are we here?
Danone’s joint venture and cooperation with Mengniu dates back to 16 years ago, and there have been more than one “on-off and on-off” in this process.
Public information shows that in 2006, Danone and Mengniu announced the establishment of a yogurt joint venture, with Mengniu holding 51% and Danone holding 49%. According to the two sides, Danone has the advantages of global advanced quality management technology and product innovation ability, while Mengniu Dairy has the leading position and distribution strength of yogurt Market in China, and the two sides can jointly create synergistic benefits.
In April 2007, Danone transferred the “biyou” brand originally handed over to Guangming operation research to Mengniu for production and sales, and then “broke up” with Guangming. However, the yogurt joint venture between Danone and Mengniu was terminated in December 2007 on the official grounds that “the preconditions for further investment have not been reached within the time specified in the agreement”.
Historical data
Six years later, the two companies “renewed the leading edge”. In July 2013, COFCO, Danone and Mengniu signed an agreement. Danone became a strategic shareholder of Mengniu by holding 4% of Mengniu Dairy through a joint venture with COFCO, and plans to increase its stake in Mengniu according to market progress in the future.
On the same day, Mengniu announced the signing of a framework agreement with Danone. Danone’s yogurt business in China will be merged with Mengniu’s yogurt business (in 2012, the total sales of the two businesses were about 4 billion yuan and the market share was about 21%). The two sides will establish a new joint venture to engage in yogurt production and sales. For the above two cooperation, Danone’s total investment is about 2.6 billion yuan.
In 2014, the joint venture “Inner Mongolia Mengniu Danone dairy company” announced that it had entered the full operation stage, with Mengniu and Danone accounting for 80% and 20% of the shares respectively. Since June 2014, some SKUs of Danone “biyou” brand yogurt have been put into production in Mengniu MAANSHAN low temperature factory.
However, since last year, Danone has officially revealed that its “marriage” with Mengniu is coming to an end.
In March 2021, Danone, as the “second shareholder” of Mengniu, said that it would divest Mengniu’s shareholding through one or more transactions in that year according to the market conditions.
At that time, Danone’s indirect shareholding in Mengniu was worth about 850 million euros and contributed 57 million euros of recurring income in 2019 through its associates. Then, in May, Danone announced the liquidation of Mengniu and completed the sale of about 9.8% of the shares of Mengniu, with a total income of HK $15.4 billion. After the transaction is completed, Danone will no longer hold Mengniu shares, and the proceeds will be used to buy back Danone’s shares and give back to its investors.
In addition, the yogurt joint venture between the two sides will go into history, which was also “solid hammer” last year. When checking Mengniu’s 2021 interim report, the snack generation noticed that the company disclosed that it would buy back all the rights and interests held by Danone Asia in the yogurt joint venture.
According to the above interim report, on June 30, 2021, Mengniu terminated the recognition of all the rights and interests held by Danone Asia of 527 million yuan (December 31, 2020: 446 million yuan), and recognized the current value of 1.601.2 billion yuan (December 31, 2020: 1.600 billion yuan) payable when exercising the option as financial liabilities, and included the difference in equity.
In addition to yogurt, Mengniu and Danone once had an intersection in the plant-based field, although it was not a “happy ending” in the end.
In July 2016, Danone disclosed that it acquired American plant-based food manufacturer Baibo company for nearly US $12.5 billion, and Baibo had established a joint venture Zhipu mill with Mengniu as early as 2014 to introduce American soymilk silk and other brand products into China. As Baibo was later acquired by Danone, Zhipu mill was also jointly operated by Danone and Mengniu in China.
Since then, with the “separation” of the two sides, Danone has chosen to “work alone” to import more of its plant-based products into China.
As for the origin of Danone and Yashili, itself strongly depends on Mengniu as an “intermediary”.
In 2014, Mengniu, Yashili and Danone jointly signed a share subscription agreement. According to the agreement, Danone will participate in the private placement of Yashili international and become the second largest shareholder of Yashili after Mengniu with a 25% stake.
Danone has said that its stake in Yashili belongs to the expansion of cooperation with Mengniu. “In 2013, Danone and Mengniu established a joint venture and established a strategic cooperative relationship in yogurt and low temperature business. Over the past year, the cooperation between the two sides has progressed smoothly. Danone’s international leading technology and operation experience, combined with Mengniu’s strong sales network and local market experience, has achieved good performance and firmly occupied the first position in the yogurt Market.”.
Danone also described it as “a strategic and long-term investment” and said that Yashili’s product line, channel and procurement were well complementary to Danone. Another background that needs to be emphasized here is that Danone’s milk powder brand Domex was impacted by Fonterra Botox Oolong incident at that time.
In December 2015, Yashili announced that it planned to acquire all the equity of Domex China at a price of 150 million euros. The company once said that the reasons for the acquisition include that “Dumex” still has a high reputation in China, and obtaining Dumex’s sales network in China will also help Yashili expand its first and second tier cities.
It is worth mentioning that Danone wrote down as much as 398 million euros for Domex, whose business in China was seriously frustrated. By selling Dumex to Yashili, Danone promoted its milk powder business in China by reshuffling – getting rid of Dumex’s model of large supermarket sales, quickly switching to the e-commerce runway, seizing the wind of “overseas shopping” milk powder by Chinese consumers at that time, and reopening the situation in China through its brands such as altami and nuoyneng.
In addition, after selling Dumex, the cooperation between Danone and Yashili can be further extended to the level of supply chain.
For example, according to the strategic cooperation supply agreement disclosed by Yashili in November 2016, its subsidiary dairy New Zealand sold milk powder based powder products and dairy raw materials to Danone. Since 2019, Yashili New Zealand factory has also provided sheep milk powder processing services for Danone’s indirect subsidiary and Danone’s member company milupa.
各自打算
那么，这场“联姻”的彻底告终，对达能、蒙牛来说意味着什么？
首先对达能来说，这意味着这家法国食品巨头在中国又进入到了几乎完全“单干”的新阶段，而不再需要借助中国大型食品同行的间接支持。在历史上，这种状态曾经在“达娃”之争后短暂出现过。
为什么达能如今有了“单干”的底气？这可以从它目前在华业务看得出来。达能财报显示，2022年第一季度，中国市场所在的大区（注：由中国、北亚、大洋洲组成）为其全球增长最高的市场，销售额同比增长15.3%至7.35亿欧元（约合人民币50.86亿元）。
这当中，主要的收入均靠达能“单干”来贡献：在中国市场所属大区，达能专业特殊营养业务一季度的销售额为5.43亿欧元（约合人民币37.57亿元），同比增长21.5%；饮用水和饮料销售额为1.15亿欧元（约合人民币7.96亿元），同比下降1.2%；基础乳制品和植物基销售额为7700万欧元（约合人民币5.33亿元），同比增长4.0%。
Company information
对此，达能首席财务官Juergen Esser表示，达能在华将会把重点放在推动爱他美品牌在不同渠道取得增长，此外也会加码成人营养品和儿童特医食品。此外，尽管在华的饮料品牌脉动上季销售额同比略有下滑，但市场份额“保持稳定”，基本消费面和分销的业务目标也得到“良好推进”。
“We have become the largest multinational enterprise (in China’s milk powder Market). Among them, aitamei’s market share has reached 9%.” Xie Weibo, President of Danone Greater China and Oceania, said in March. This highlights the importance of China’s milk powder business as a “c-person”.
He said that for accelerating the listing of new products, the local production of milk powder (in order to obtain the qualification of Chinese milk powder formula registration) is becoming more and more important. Danone has also taken actions to speed up the establishment of local supply network, including the recent strategic cooperation with obijia, which will enable it to speed up the provision of Chinese label products in line with the national standard of milk powder.
Therefore, compared with the preparation from scratch, the direct acquisition of local factories holding formula quota is undoubtedly a shortcut.
Danone basically follows a similar logic when buying Domex this time. Check the registration data of milk powder formula (the table below). Domex currently holds several registered formulas, among which Danone is optimistic about its future sheep milk powder formula.
For Mengniu, the joint venture is not the same track.
分不同业务板块看，蒙牛自有的品牌和近年陆续收购的乳制品业务，支持了它的快速增长。
其中，特仑苏所属的液态奶收入同比增长12.9%至765.14亿元；包括雅士利及贝拉米业务的奶粉收入同比上升8.2%至49.491亿元；冰淇淋业务收入同比提升61.0%至42.4亿元，去年集团收购了东南亚冰淇淋品牌艾雪；另外，去年奶酪业务收入同比增长126.3%，蒙牛在7月份完成对妙可蓝多战略投资增发。
值得指出的是，通过和达能“拆伙”并私有化雅士利，理论上反而可以有助于蒙牛旗下的各大奶粉业务深度协同。如果蒙牛决心要把内部资源协同起来，对所持有的雅士利、贝拉米等中外奶粉品牌进行调整，那么它将更有底气实现其早前订立的奶粉业务“100亿”目标。
Perhaps one sentence can summarize Mengniu’s feelings about this “marriage” becoming history – Mengniu emphasized as early as last year that its future business strategy and plan will not be changed due to Danone’s arrangement, and it will more efficiently implement the development plan for the next five years to achieve the 2025 strategic goal of “creating a new Mengniu in five years”.
For the latest transactions in this series, foreign power also pays close attention to them today.
Reuters pointed out that refinitiv’s data show that Yashili’s share price has fallen by about 70% since Danone took a stake.
French media Le Figaro said today that China currently contributes 10% of Danone’s sales, and Danone “is eager to improve its milk powder production capacity locally”. The report pointed out that the sale of Mengniu’s shareholding had been deployed in the era of former CEO Emmanuel Faber, when investors asked him to improve his performance and give more feedback to shareholders.
“This is the first time Danone has issued a sale announcement since market rumors spread at the end of April.” Figaro newspaper said that the rumor said that French dairy giant lantris would consider acquiring Danone in part or in whole. Danone denied that it had plans to sell any business to lantris on the same day, but confirmed that the company’s strategy of updating its brand portfolio would be continued and implemented by the new CEO Sheng Ruian.
Xiaoshidai will continue to pay attention to the follow-up progress of this transaction between Danone and Mengniu.
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