French multinational food group Danone has announced plans to double its stake in China's largest milk producer.
Danone will pay €486 million to increase its shareholding in China Mengniu Dairy from 4% to 9.9%. The company said today that the purchase will be made through a joint venture with the dairy group's parent company Cofco, as well as Denmark's Arla Foods.
The move will make Danone, the world biggest yoghurt maker, Mengniu's second largest shareholder.
Booming Chinese demand for dairy products has sparked a raft of mergers, acquisitions and IPOs in China's dairy sector recently.
Sales of dairy products in China are expected to nearly double from 2012 to 2017 to about €65 billion, according to estimates by business consulting firm Frost & Sullivan.
Danone chief executive Franck Riboud called the deal a "winning combination" for the companies involved.
"This transaction is consistent with Danone's strategy to increase our interest in and join hands with Mengniu to capture the huge growth potential of the chilled dairy products market in China," he said in a statement.
The deal with Danone still needs to be approved by Mengniu's shareholders and is expected to be finalised by the end of the year.
© 2014 - European Supermarket Magazine by Enda Dowling
