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Mengniu Exits Junlebao With Stake Sale to Government Buyer

By Shen Xinyue and Han Wei / Jul 02, 2019 03:20 AM / Business & Tech

Photo: VCG

Photo: VCG

China Mengniu Dairy Co. Ltd. agreed to sell all of its 51% holding in baby formula and yogurt maker Shijiazhuang Junlebao Dairy Co. Ltd. as it seeks to concentrate on its core business and enhance financials, the company said Monday.

Analysts said the stake sale was engineered by the Hebei provincial government as part of efforts to strengthen the local dairy industry and push forward a listing of Junlebao.

Mengniu sold the stake for more than 4 billion yuan ($583 million), nearly 10 times what it paid for the Junlebao position in 2010. The buyers are the Hebei government-controlled investment firm Shijiazhuang Penghai Investment Funds and privately owned Shijiazhuang Junqian Enterprise Management Co.

Mengniu’s sale of Junlebao is being made under the guidance of government and in preparation for a Junlebao public listing, said Wang Dingmian, a dairy industry analyst. Wang said Mengniu would not voluntarily exit as Junlebao’s business is on the rise.

The Hebei government in April issued a plan to bolster the local dairy industry by creating leading industry players in the province. According to the plan, the government would support a public listing of Junlebao.

Junlebao’s net profit reached 307 million yuan in 2018, rising from 193 million yuan the previous year. It contributed about 10% of Mengniu’s net profit.

Related: Mengniu Dairy Announces Olympics Deal Amid Spat With Rival Yili


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