Caixin
Jul 31, 2018 06:42 PM
BUSINESS & TECH

Yili Seeks Wider Pasture in Pakistan

Yili milk on display in a supermarket in Shanghai on May 7, 2018. Photo: VCG
Yili milk on display in a supermarket in Shanghai on May 7, 2018. Photo: VCG

China’s largest dairy producer by revenue said it plans to acquire a majority stake in a Pakistani counterpart, as it moves toward its goal of selling to 2 billion consumers at home and abroad within the next three years.

Inner Mongolia Yili Industrial Group Co. Ltd. has submitted a letter of intent to buy an up to 51% stake in the loss-making Fauji Foods Ltd., a subsidiary of Fauji Fertilizer Bin Qasim Ltd., according to a company filing (link in Chinese) to the Shanghai Stock Exchange on Tuesday. No financial terms were disclosed.

The proposed transaction is still at an early stage and no legally binding agreement or contract has been signed, the statement said.

Yili aims to be one of the world’s top five dairy companies by 2020, reaching an annual revenue of 100 billion yuan ($14.7 billion). In 2018, the company’s revenue is projected to grow 13% year-on-year to 77 billion yuan, with a 6% rise in profit before tax to 7.5 billion yuan, according to a JP Morgan research note.

Registered in the northeastern Pakistani city of Lahore, Fauji Foods produces dairy and fruit products. It widened its loss to 619 million rupees ($4.95 million) in the first quarter this year, from 447 million rupees a year ago.

“I think that in the future, Chinese product quality will receive recognition from more and more countries around the world,” Yili CEO Zhang Jianqiu told Caixin in January. “We have a small goal, which is to allow 2 billion consumers around the world to enjoy our products by 2020.”

Yili opened its first major overseas plant in New Zealand in 2014, through its subsidiary Oceania Dairy Ltd. The company made headlines last year when it made a bid for a controlling stake of financially troubled Australian dairy giant Murray Goulburn Co-operative Co. Ltd. The bid eventually failed.

Other Chinese dairies have also experimented with global purchases, with Bright Food — China’s third-largest dairy company  buying 78% of Israel’s Tnuva in 2014 in a deal that valued Tnuva at $2.5 billion.

Contact reporter Jason Tan (jasontan@caixin.com)

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