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Baby milk formula giant China Feihe, endorsed by film star Zhang Ziyi, offers HK$3 billion to buy its supplier YuanShengTai Dairy Farm

  • The deal, which needs shareholder approval, is the biggest expansion move by Beijing-based Feihe since its listing in Hong Kong in November when it raised HK$6.7 billion (US$856 million)
  • Feihe has purchased fresh milk from YuanShengTai to produce its baby milk formula products since 2010

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YuanShengTai, which means ‘organic living’, said the offer would give its shareholders a good chance to cash in, because of its low turnover since its listing in 2013. Photo: Tom Wang
Enoch Yiu

China Feihe, whose baby milk formula is endorsed by film star Zhang Ziyi, has offered HK$3.07 billion (US$398.68 million) to take over its supplier YuanShengTai Dairy Farm, according to a joint stock exchange filing on Sunday.

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The deal marks the biggest expansion move by the Beijing-based Feihe, whose name means the “flying crane” in Chinese, since its listing in Hong Kong in November last year when it raised HK$6.7 billion (US$856 million).
Through the takeover, Feihe “will be able to secure stable supply of high-quality fresh milk from [YuanShengTai] to satisfy consumers’ growing demand for its infant milk formula products,” the joint announcement said.

Feihe has purchased fresh milk from YuanShengTai to produce its baby milk formula products since 2010. The farming company’s quality management expertise will also help Feihe to improve quality control when buying raw milk from other smaller dairy farmers, the filing said.

The offer price of HK$0.63 per share represents a premium of 1.6 per cent over YuanShengTai’s last trading price on Thursday and a 17.5 per cent premium on its average trading price of the past 30 days. YuanShengTai was suspended from trading on Friday pending the announcement, and plans to resume trading on Monday.

Feihe intends to use its internal resources to finance the deal. Its financial adviser CLSA Capital Market indicated the milk company has sufficient resources to settle the offer. Feihe plans to keep YuanShengTai as a listed company in Hong Kong and will retain at least 25 per cent of the farming company’s shareholding to be owned by public shareholders.

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