A statement released by Mengniu, the parent company of Yashili said "Yashili and Danone intend to, among other things, collaborate in New Zealand with respect to a manufacturing facility with an aim to achieve synergies and support in various areas".
Yashili is nearing the completion of its infant formula processing plant at Pokeno. Danone owns the Gardians milk processing plant located in Balclutha.
Danone currently holds a 25% stake in Yashili.
Danone also has a share in Mengniu. Danone and Mengniu have signed a Memorandum of Understanding (MOU) which sets forth a plan for Danone to sell its Dumex China infant formula brand to Yashili. Danone will then use the funds from the sale to increase its stake in Mengniu.
The statement from Mengniu said "Danone intends to sell to Yashili its entire ownership interest in Dumex China, and use the proceeds to be received by it from the proposed acquisition to subscribe, through CDI [COFCO Dairy Investments Limited], for such number of shares in Mengniu Dairy."
Danone noted in its half yearly results that it had changed its strategy around China.
"In China, following the accelerated structural changes in distribution dynamics for infant milk formula, Danone has decided to reallocate its resources within this market and subsequently to revise downward long-term sales projections for Dumex, leading to an impairment of the brand." The company noted that a -€398 million impairment loss primarily related to certain Dumex assets in China.
Dumex was one of the brands caught up in Fonterra's botulism scare in 2013. "Dumex brand products remained well below levels observed in early 2013, hit hard by the false alert raised by Fonterra and by the shift in consumer preferences from supermarkets to both online sales and specialized distribution" says Danone.
Danone has reached a preliminary agreement with Mengniu and Yashili to merge Dumex in China with Yashili. Danone says this will allow it to build a strong local infant formula brand platform.
