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Danone to take 25% stake in Chinese PE-backed dairy firm

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French dairy giant Danone will buy a 25% stake in PE-backed Chinese infant formula maker Yashili from majority shareholder China Mengniu Dairy for HK$4.4 billion ($567 million).

According to a regulatory filing, Danone has agreed to subscribe 1.2 billion shares of Hong Kong-listed Yashili at HK$3.70 apiece through a private placement. Upon completion of the deal, Mengniu's holding will be diluted to 51.04% from 68.05%.

The strategic partnership allows Yashili to leverage on Danone's advanced technology and expertise with a view to providing safe and high-quality products to domestic consumers. Yashili will also consider making a minority investment in Danone subsidiary Dumex China.

Mengniu acquired a 75.3% stake in Yashili from majority shareholder the Zhang family and The Carlyle Group in June 2013. The private equity firm received approximately HK$3 billion for its 24% holding.

Last November, Temasek Holdings, Hopu Investment Management and three other investors bought a 13.24% stake in Yashili from Mengniu for HK$1.6 billion. The transaction took place so that Yashili could meet the minimum public float percentage required by the Hong Kong Stock Exchange.

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