PE firm Ping An Capital acquires stake in Mengniu Dairy’s unit for US$568m

CHINA – Ping An Capital, the private equity unit of Chinese insurer Ping An Insurance, announced that it has teamed up with two companies to acquire a majority stake in dairy products maker Junlebao for 4 billion yuan ($568 million).

The deal involves Ping An Capital together with Chinese global investment firm Primavera Capital Group and corporate management firm Junqian Management.

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The companies will acquire a 51 per cent stake in Shijiazhuang Junlebao Dairy from China’s leading dairy firm, Mengniu Dairy for US$568 million, Ping An Capital announced in a statement released on its WeChat official account.

Upon the completion of the transaction, the baby formula and yogurt maker will operate separately and independently from Mengniu Dairy, reports DealStreat Asia.

In June this year, Mengniu had announced plans to sell the stake to Shijiazhuang Penghai Venture Capital Fund and Junqian Management for 4.01 billion yuan (US$570 million).

The recent announcement confirms the private equity firms as the new owners of Mengniu Dairy’s stake in Junlebao.

Through the proposed deal, the company is expected to strengthen its balance sheet and financial position, and focus on core businesses and expansion of premium dairy products, Mengniu noted in a previous filling with the stock exchange.

Commenting on the deal, Tian Tuo, managing director of Ping An Capital said: “We are optimistic about the long-term growth of the Chinese dairy market. Changes in the dairy industry are in favour of the future development of Junlebao.

Tian observed major changes in the Chinese dairy industry to include the increasing popularity of yoghurt and milk powder and growing acceptance of low-temperature pasteurised milk.

In addition, dominant positions taken by top players in the infant milk powder production sector due to the introduction of a stringent registration system is also expected to boost the sector prospects, according to Tian.

Founded in 1995, Junlebao Dairy, is one of the largest dairy enterprises in China with 13 billion yuan (US$1.85 billion) in sales revenue in 2018.

The company, with over 10,000 employees, is mainly involved in the production of milk powder, low-temperature yoghurt and milk, as well as animal husbandry.

The firm has 17 production plants and 10 modern ranches in Chinese provinces like Hebei, Henan, Jiangsu and Jilin.

Analysts said that Mengniu’s sale of Junlebao is being made in preparation for a Junlebao public listing.

Meanwhile, the Alibaba Group is also said to be planning a 150 million yuan (US$21 million) investment in Tianxianpei, a Shanghai-based online-to-offline (O2O) milk delivery platform owned by Mengniu Dairy.

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