Fonterra to sell Beingmate shares as part of turnaround plans

New Zealand’s multinational dairy co-operative Fonterra is planning to sell a portion of its stake in Chinese infant formula manufacturer Beingmate Baby & Child Food Company Ltd as part of its plans to turnaround the business.

The company currently has a shareholding of 18.8 per cent in Beingmate, and following a recent review of the relationship, Fonterra said it has been “disappointing”.

The NZ Herald reported that the dairy giant could lose hundreds of millions of dollars on the investment. Fonterra has already written down the investment by more than $430 million on its balance sheet.

As part of Fonterra’s turnaround plan, the company has re-evaluated its investments, major assets and partnerships.

“This started with a strategic review of our relationship with Beingmate, which has been disappointing,” Fonterra chief executive Miles Hurrell said in a statement to the ASX on Wednesday.

“The first action in this review was bringing the distribution of Anmum in China back in-house under our management.

“We then ended the Darnum joint venture with Beingmate, bought back Beingmate’s share of our Darnum facility in Australia, and entered into a multi-year agreement for Beingmate to purchase ingredients from us.”

Hurrell said the Beingmate shareholding that remains is now viewed as “a financial investment only”.

Fonterra paid 18 yuan per share for its Beingmate shares for a total outlay of NZ$755 million as part of a joint venture partnership according to the NZ Herald. Beingmate shares last traded on the Shenzhen Stock Exchange at 4.94 yuan.

The dairy giant talked to a number of parties regarding the potential sale of its entire stake in Beingmate, but was unsuccessful in finding a buyer and is therefore considering selling part of its holding.

Under the Shenzhen Stock Exchange market rules it is only possible to sell up to 1 per cent every 90 days directly on the exchange, or sell up to 2 per cent in a single block every 90 days.

“From here, it’s about making pragmatic decisions to get the best outcome for the Co-op from our holding in Beingmate,” Hurrell said.

“China will always be one of our most important markets. We’ve got a strong business there and are still very much focused on the areas in China where we can succeed.”

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