Biostime looks set to acquire Chinese infant formula manufacturer Changsha Yingke Nutrition - a deal it believes will further the success of its French-made ADIMIL milk powder range.
Earlier this week, Biostime Guangzhou and Biostime Health - both wholly owned subsidiaries of Biostime International Holdings - entered into an agreement with Hunan AVA Dairy and Hunan Changsha AVA Dairy to acquire a 100% equity interest in Changsha Yingke Nutrition Product Company Limited.
Through the RMB 350m ($58m, €42m) takeover, Biostime expects to increase production capacity for its new ADIMIL milk powder range by between 30,000 and 50,000 tonnes.
It first introduced ADIMIL to China in September 2013 through its partnership with French dairy processor, Isigny Sainte Mère (ISM).
“Won consumers’ trust”
Consumer confidence in the safety of domestically manufactured infant formula has been blighted in recent years by a series of contamination scandals, which led to hundreds of thousands of cases of illness and dozens of deaths.
In an attempt to offset these concerns, Biostime agreed last year to finance a €20m expansion of the French firm’s infant formula production and packaging capabilities in Normandy. The investment was designed to boost ISM’s manufacturing capacity to 50,000 tonnes per year by 2016. Of this, Biostime agreed to purchase 18,000 tonnes.
Through its ties to ISM, Biostime claims that it has again “won consumers’ trust" in China.
“To leverage on the success of the Group’s France-imported ADIMIL series milk powder launched in September 2013, the Group has decided to continue to develop the series in 2014 to capture the demands of high-end customers in fourth- and fifth-tier cities of the PRC by launching new products under such series,” said a statement filed with the Stock Exchange of Hong Kong.
Committed to quality control
By producing the ADIMIL milk powder range on Chinese soil, Biostime says it can also shorten supply times while maintaining the quality associated with its imported ADIMIL product.
“By utilizing Changsha Yingke’s manufacturing capacity of 30,000 to 50,000 tonnes of infant formulas milk powder per year, the Group will manufacture the new products of the ADIMIL series using imported milk source and will be able to shorten the time required to supply the new products of the ADIMIL series to consumers,” said the Stock Exchange of Hong Kong notice.
“As the Group is committed to quality control, all products to be manufactured by Changsha Yingke will strictly follow the quality control systems that have been consistently implemented throughout the Group to ensure the products are safe and of the qualities demanded by our customers,” it added.