The planned 9 billion yuan in private placement of shares by dairy giant Inner Mongolia Yili Industrial Group, will dilute its earnings by share (EPS), according to a fresh note Deutsche Bank, but enhance its long-term growth, Yili unveiled the carefully structured 4.6 billion yuan takeover of Hong Kong-traded China Shengmu Organic Milk, China’s largest producer of organic milk, on Monday [24 October 2016] and issued new stock to create a so-called poison pill to ward off any potential hostile takeover from its third-largest shareholder, Sunshine Insurance Group…Full Article: South China Morning Post Oct 2016

Key Point

  • The CNY 9 billion [~US$1.3 billion] placement of new shares will be raised by Hohhot City Asset Investment, Inner Mongolia Transportation Investment, Jinshi Haorui Investment [Qingdao based private equity firm], Ping An Asset Management [Hong Kong based insurance company], and Jinmeihua Investment. Of the CNY 9 billion, CNY 4.6 billion [~680 million] will be used to acquire a 37% stake in China Shengmu Organic Milk (HKG:1432).

ChinaAg Comments

  • In September 2016, Sunshine Insurance Group increased its stake in Yili Group. As a result, Inner Mongolia’s largest shareholders included Hohhot Investment (8.8%), Hong Kong Securities Clearing (6.22%), and Sunshine Insurance Group (5%).
  • In 2015, Inner Mongolia Yili Group was ranked China’s top consumer brand, and was followed by Master Kong (see Tingyi Cayman Islands), Mengniu and Want Want China.
  • Inner Mongolia Yili Group (SHA:600887) traces its roots back to 1956 when it operated as a dairy cooperative in Hohhot, Inner Mongolia Region. In 1993, the company was restructured as Yili Group and began its ice cream operations. Currently, Yili produces milk, milk beverages, sorbet, ice cream, milk powder, milk tea powder, yoghurt, and cheese. Since 2005, the company has been China’s top supplier of milk powder and milk tea powder.
  • Founded in 2009 and headquartered in Bayannur, Inner Mongolia Region, China Shengmu Organic Milk (HKG:1432) is China’s largest organic milk producer and had an estimated 54% market share (organic milk) in 2013.
  • Founded in 1988 and headquartered in Hong Kong, Ping An Insurance (HKG:2318) &  (SHA:601318) is a financial services company whose products include exchange-traded funds (ETF), life insurance, and other banking/investment services.

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