China’s Bright Food to buy majority stake in Israel’s Tnuva
State-owned Bright Food said on Thursday it would buy 56% of dairy firm Tnuva from private equity house Apax under the terms of a preliminary accord.
Bright Food did not disclose the sum, but Israel’s Mivtach Shamir Holdings, another major shareholder in Tnuva, said the deal valued all of the dairy firm at about $2.5bn (€1.83bn).
The deal, the latest in a multi-billion dollar overseas acquisition spree by Bright Food, will give the Chinese firm access to new cheese products and the Israeli firm’s technological know- how in dairy production, trade sources and analysts said.
Best known for its cottage cheese, Tnuva had 2013 revenue of 7.17bn shekels (€1.5bn) from the sale of a range of cheeses, as well as milk, yoghurt, meat, and eggs.
Bright Food Group also recently signed a memorandum of understanding with Irish dairy group Glanbia.
The investment in Tnuva comes as increasingly affluent Chinese consumers opt to pay more for imported goods in the wake of safety scandals in local food supply chains. The Chinese cheese market will be worth 2.7bn yuan (€317m) this year, doubling to 5.3bn yuan by 2018, according to consultancy Euromonitor.
“China is still a niche market but there’s lots of room for growth. We’re getting increasing interest from international clients who are interested in China,” said Matthieu David-Experton, CEO at Daxue Consulting.
“The imported aspect is key because it makes it a more premium product in China and plays into the food safety trend,” he said.
Mivtach said it was holding talks with Bright Food as to whether it will join Apax in the deal and sell its 21% stake in Tnuva.
Mivtach has a “tag-along” option giving it the right to sell its stake together with the Apax sale.
Bright Food will pay Apax slightly less than $1bn in cash for its 56% stake and will assume Apax’s share of bank loans totalling 1.9bn shekels, said a source. If it also buys Mivtach’s stake then Bright Food will take on the full loans amount. No deal with the banks has been reached yet.
One option being considered by Bright Food is to bring in a partner, Chinese state-supported private equity firm Sailing Capital Management, to buy Mivtach’s stake, the source said.
A group of kibbutzim, or cooperative farms, own the rest of Tnuva. Bright Food said it would look to strengthen cooperation with smaller shareholders, rather than buy them out.
As China’s cheese market has developed, Bright Food has lost out. The cheese producer with a quarter of the market by value in 2009, dropped to 8.3% last year, Euromonitor data showed.
— Reuters
