Wednesday 7th August 2019
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Fonterra Cooperative Group plans to sell down its 18.8 percent shareholding in Beingmate Baby & Child Food Co on market after failing to find a buyer for the entire stake.
The dairy giant said while it has talked to a number of parties about selling the entire stake, it has "so far been unsuccessful in finding a buyer."
“As a result of this, we are now considering selling part of our holding and, as required by local listing rules, need to pre-announce our intention," chief executive Miles Hurrell said.
However, it won't happen fast.
Subject to demand for the shares, under the Shenzhen Stock Exchange market rules it is only possible to sell up to 1 percent every 90 days directly on the exchange, or sell up to 2 percent in a single block every 90 days. Trades greater than 5 percent can be made to an individual party in an off-market transaction.
The Beingmate shares last traded at 4.94 yuan. They were trading at 17.68 yuan just before Fonterra bought the stake in March 2015, paying 18 yuan per share. Units in the Fonterra Shareholders' Fund were unchanged at $3.75 just after the market opened.
“From here, it’s about making pragmatic decisions to get the best outcome for the co-op from our holding in Beingmate,” said Hurrell.
Fonterra has been working to strengthen its balance sheet as part of its wider strategic review after posting its first full-year loss last September when it wrote down the value of its Beingmate investment.
Fonterra spent $750 million, or 3.46 billion yuan, acquiring 18.8 percent of Beingmate in 2015. It wrote off $405 million of that in the 2018 year, along with taking a $34 million hit for a share of the firm's operating losses.
While Fonterra is selling down its holding in Beingmate, Hurrell said China remained a key plank.
“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.”
Together with Beingmate, Fonterra has also sold a 50 percent stake in DFE Pharma - a joint venture with FrieslandCampina which supplies bulking agents, or excipients, in medicines including tablets and inhalers - and ice cream maker Tip Top. It is also reviewing its two farm hubs in China, considering options for the future ownership of its Brazil joint venture with Nestle, and is closing its Dennington factory in Australia.
Fonterra will update shareholders when it announces its annual result in September but has repeatedly said it was on track to reduce its debt by $800 million in the year that ended July 31.
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