Danish-Swedish dairy company Arla Foods Amba (Arla) has announced that it will be buying a stake of about 6 percent in the China-based Mengniu Dairy Company (Mengniu). This investment is the largest international cooperation in China's dairy industry to date, and is worth 1.7 billion Danish crowns ($289 million). Law firms Clifford Chance, Linklaters, Cleary Gottlieb Steen & Hamilton and Walkers have assisted in the transaction.
The agreement was sealed during the recent visit of Chinese President Hu Jintao to Denmark. After the completion of the deal, Arla will become the second-largest shareholder of the number two dairy producer in China after state-owned China National Cereals and Oils and Foodstuffs Corporation (COFCO). The shares were sold to Arla from private equity fund Hopu.
Arla and Mengniu will build a strategic partnership in terms of source supply, product import, technical management, and marketing and innovation cooperation in China and Europe. Arla has also entered into shareholders and strategic coordination agreements with COFCO to coordinate on the development of Mengniu's dairy business in China.
A Clifford Chance team led by Beijing and Shanghai managing partner Stephen Harder, Shanghai partner Kelly Gregory, and Hong Kong partner Amy Ho represented Arla in the deal. A Walkers team led by Hong Kong partner Arwel Lewis advised Arla on BVI law. Cleary Gottlieb and Linklaters acted for Mengniu and COFCO respectively.
“We continue to see a tremendous amount of interest in China inbound investment, particularly in the food and beverage sector,” said Harder in a statement. “The rise of the middle class’ purchasing power in China resulting from strong economic growth has led to greater demand for high quality and nutritious products, which makes the China market attractive to significant premium global players like Arla.” ALB
Liu Zhen is North Asia senior journalist at ALB. Follow her on Twitter:@ALB_Magazine.
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