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Partnership ends as China's Bright Dairy confirms Danone's stake sale
2007-10-16 03:36:05 Xinhua English

SHANGHAI, Oct. 16 (Xinhua) -- Bright Dairy and Food Co. Ltd., a key dairy products maker with headquarters in Shanghai, on Tuesday announced that French yogurt maker Groupe Danone SA was selling all of its stake in the Shanghai-based company, ending the strategic partnership between the two companies.

A press release from Bright Dairy and Food Co. Ltd. said the Danone equity transfer would not produce much impact on the Shanghai-based company's business because sales of Danone-brand products didn't make up a big proportion in total sales of Bright Dairy.

Danone announced its plans to sell its 20.01 percent stake in Bright Dairy for 954.85 million yuan to Shanghai Milk Group and to S.I. Food Products Holdings Ltd., with each company buying 104.24 million shares.

Danone has agreed to repaying Bright Dairy 330 million yuan in compensation for the latter's help in aiding Danone to set up marketing channels and product promotion campaigns inside China.

The deal will increase the stakes in Bright Dairy held by Shanghai Milk Group and S.I. Food to 35.18 percent each, up from 25.17 percent each.

Real reasons leading to divorce of Danone and Bright Dairy are kept unknown.

But it is reported that before the split, executives of Groupe Danone SA time and again put forward proposals urging adjustment of existing cooperation terms, including increased stake and the right to operate yogurt products in China. Those requests were left unattended.

"The relevant business cooperation agreements and the intellectual property license agreement between Danone and Bright will be terminated," said Bright Dairy in the press release.

Both partners claimed their previous cooperation a "success", but the two companies agreed on the equity transfer for the sake of their individual business strategies.

Statistics show that from 2002 to 2006, Danone earned 1.8 billion yuan for granting Bright Dairy franchises to produce and market products inside China using Danone brands. Danone brand products scored a market share of 15 percent in east China and 40 percent in south China last year.

Danone obtained about 40 million yuan in dividends from Bright Dairy between the year 2000 to 2005.

Through its cooperation with Danone, Bright Dairy has improved its overall capabilities of developing yogurt products independently, said Guo Benheng, President of Bright Dairy Co. Ltd., who insisted, however, his company was now better conditioned to expand business independently.

Bright Dairy made more than 800 million yuan in sales last month, a record high.

"After Danone equity transfers, Bright Dairy can bring its research development advantage on yogurt in full play and enlarge market share of yogurt products using fungus developed independently by Bright Dairy," said Guo.

Danone and Bright set up a 50-50 yogurt joint venture in 1992. The joint venture underwent a stake diversification reshuffle and went public in 2000.

The French dairy goods maker also has a joint venture with China's biggest milk producer, China Mengniu Dairy Co., to make yogurt and a stake in China Huiyuan Juice Group.

A joint venture with Chinese beverage maker Wahaha Group has been dogged by disputes over ownership and management issues.

((One U.S. dollars equals to 7.52 yuan)

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