Danone (BN), owner of Activia yogurt and Evian water, will spend about 325 million euros ($417 million) to form a joint venture and invest in China’s biggest dairy producer to expand its brands in the most populous nation.
Danone will have an initial indirect interest of about 4 percent in China Mengniu Dairy Co. (2319), with the aim of increasing that in the future, the Paris-based company said in a statement today. It will also set up a venture with Mengniu for yogurt products in China. Mengniu shares surged the most in four years.
An excerpt from The Fragile Bridge – Conflict Management in Chinese Business
Great Moments in Chinese Conflict Management
Groupe Danone of France was a frontrunner in the race to win the China market, striking what it thought was a win-win deal with a well-known Chinese brand, Wahaha. The two companies formed the first of a series of JVs in 1996 using a fairly typical structure of those times that ultimately gave Danone fifty-one percent of the new firm – and rights to the Wahaha trademark – in exchange for an investment of $41 million. Or so the French dealmakers believed. In a move that now seems naïve, Danone maintained the partnership agreement even after Chinese regulators struck down the transfer of the trademark. Instead, the two firms made a private contractual agreement to transfer use of the Wahaha name to Danone – a deal that would later be found insufficient to protect the French group’s interests in China.