Yashili To Acquire Mengniu Arla For CNY1.05 Billion

Yashili's business in Guangdong and Inner Mongolia Mengniu have signed an equity transfer agreement, under which Yashili's business will acquire the entire stake of Mengniu Arla from Inner Mongolia Mengniu for CNY1.05 billion in cash.

Yashili (Guangdong) is an indirect wholly-owned subsidiary of Yashili; Inner Mongolia Mengniu is a subsidiary of Mengniu; and Mengniu Arla is a wholly-owned subsidiary Inner Mongolia Mengniu. Mengniu Arla is mainly engaged in manufacturing and sales of infant formula and adult milk powder products.

As Mengniu is the controlling shareholder of Yashili, holding a 51.04% stake, and Mengniu Arla has been the major operator of Mengniu's milk powder business, the transaction also means that Mengniu will integrate all milk powder businesses into Yashili.

Mengniu will help Yashili improve market share and realize better scale. By acquiring advanced milk powder manufacturing facilities, the company can optimize manufacturing network and cut manufacturing costs. In addition, the transaction will reduce Yashili's competition with controlling shareholder Mengniu.

Mengniu Arla was founded by Mengniu Group and Danish dairy giant Arla Foods on January 27, 2006. With joint investments of CNY540 million, the joint venture was 51% owned by Mengniu and 49% owned by Arla Foods. In 2012, Mengniu gained the entire stake in Mengniu Arla.

By April 30, 2015, Mengniu Arla's total assets were about CNY420 million and its net assets were about CNY5 million. The company started making profit in 2014. In 2012, it made losses of CNY237 million; in 2013, it made losses of CNY28 million; and in 2014, its net profit reached CNY79 million.

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