Yili scraps planned take-over of China Shengmu Organic Milk
May 2, 2017 Category Mergers & Acquisitions, Weekly
Inner Mongolia Yili Industrial Group has scrapped a CNY4.6 billion takeover of Hong Kong-listed China Shengmu Organic Milk because it failed to get regulatory approval. Shanghai-listed Yili, China’s leading milk producer, also said it would not proceed with its plan to raise up to CNY9 billion in a private placement to finance the deal after the offer collapsed. In October Yili, via a subsidiary company, announced plans to purchase a 37% stake in Shengmu, the largest producer of hormone-free dairy products in China which meet the European standards for organic milk. The takeover offer was made when there was keen competition among Chinese milk producers to capture more of the premium market segment amid a shift to high end products and more healthy food by the rising Chinese middle class. The deal needed approval from Beijing’s Anti-Monopoly Bureau in order to proceed by the deadline of April 21. Shengmu said the collapse of the deal would not have a negative impact on its business. According to Euromonitor International, Yili is China’s largest dairy producer by retail sales with a 22.3% market share, followed by China Mengniu Dairy (17.3%) and Hebei Yangyuan Zhihui Beverage (5.2%), while Shengmu has a 0.7% share.
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