Thursday, 17 June 2021

Danone partners with CDI to convert stake in Chinese partner Mengniu

02 March 2021 | News

Mengniu is a leading Chinese manufacturing and distribution company of dairy products

Image source: Shutterstock

Image source: Shutterstock

As part of its ongoing portfolio review, Danone has announced that it has reached an agreement with  COFCO Dairy   Investments   Limited   (CDI),   to convert Danone’s stake in  China  Mengniu  Dairy  Company Limited (Mengniu),   currently held indirectly, into a   direct holding.  Listed on the Hong  Kong Stock   Exchange with a   current market capitalization of approximately  €18 billion,  Mengniu is a leading Chinese manufacturing and distribution company of dairy products,  in which   Danone first became a shareholder in   2013. 

This is the first step towards facilitating Danone’s disposal of its stake in   Mengniu. This conversion process remains subject to regulatory approval and once completed, will result in Danone owning a direct  9.8%  stake in Mengniu. 

A divestiture of Danone’s stake in   Mengniu could then follow in  2021 through one or several transactions,  depending on market conditions.  Danone’s indirect stake in  Mengniu’s share capital currently represents a  book value of approximately   €850   million and had in   2019   a   contribution to recurring income from associates of  €57 million.

Subject to completion,  and in line with Danone’s disciplined capital allocation, the majority of the expected proceeds will be returned to shareholders through a share buyback program. 

Beyond this transaction,  China remains highly strategic for  Danone.  The company has a  strong commitment to the country through its several categories,  operations and employees. 

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