FRANCE – French dairy company, Danone has finalized the strategic sale of its approximately 9.8% stake in China Mengniu Dairy Company Limited.
According to a statement from the French dairy company, the transaction resulted in total gross proceeds of HKD 15.4 billion (US$1.93 billion) The settlement of the transaction will take place on May 17, 2021.
The company further noted that in line with its disciplined capital allocation, the majority of the proceeds will be returned to shareholders through a share buyback program that will be announced soon.
Mengniu is listed on the Hong Kong Stock Exchange with a current market capitalization of approximately €18 billion (US$21.6 billion).
The French dairy first became a shareholder in 2013and its divesture is in line with Danone’s portfolio review, which includes divesting assets that do not contribute to profitable growth.
It also follows Danone’s announcement made last October Danone that it had agreed to sell its stake in Japanese probiotic yoghurt maker Yakult Honsha.
Beyond this transaction, the French dairy multinational says that China remains highly strategic for Danone.
The company has a strong commitment to the country through several of its categories, operations and employees.
Last July, Danone invested €100 million (US$120 million) to strengthen Specialized Nutrition in China, further serving Chinese health needs while becoming the biggest B Corp company in Asia.
Danone’s other investments include the opening of an open-science research center based in Shanghai and the acquisition of local infant milk formula capabilities.
The company has also invested in the expansion of capacity to further develop offerings in FSMP (Food for Special Medical Purposes), meaning food for people whose nutritional requirements cannot be met by normal foods.
The sales follows the ouster of former Danone Chairman and CEO Emmanuel Faber after clashes with some board members over strategy and calls from activist funds for him to resign over the group’s lacklustre returns compared with some rivals.
French paper Les Echos in May reported that Antoine de Saint-Affrique was the frontrunner to become Danone’s new CEO.
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