On March 3, Yili announced that by the cut-off date of the offer, the offeror held or controlled a total of 953,163,623 shares in Ausnutria Dairy, accounting for approximately 52.70% of the total shares already issued. The move signifies that Yili is approaching completion of buying out Ausnutria, after it first signed the deal to become Ausnutria’s largest shareholder last year, thereby cementing its leadership in China’s milk powder market.
According to analysts, this successful buyout will provide a major uplift to Yili’s performance and lead to an increase of the company’s earnings per share (EPS) in the short term. Wind’s consensus data shows that, the combined size of the two parties was close to US$18.98 billion (RMB 120 billion) in 2021. Yili’s performance indicators are also projected to gain further growth after the consolidation of two financial statements.
Both Yili and Ausnutria will benefit from the overall strategic integration and synergies. After the buyout, the two companies will run complementarily in terms of business layout, supply chains, channel building and other aspects, thereby further strengthening synergies.
As one of the global top five dairy producers, Yili has demonstrated strong capabilities in technological innovation and product development. With regards to its infant formula sector, the company played a pioneering role as the first Chinese dairy producer dedicated to studying breast milk components two decades ago and has carried out research with over 10 million pieces of data.
Since China released its strictest standards on infant formula, Yili received the qualification in just a single year. BeiGuan milk powder under Yili’s Jinlingguan has been listed as one of the first-batch infant formula brands that met the new national standards, showing Yili’s strong capabilities around quality control.
Data shows that Yili’s infant formula is capturing market share at a faster pace. According to Nielson, Yili’s milk powder business achieved a year-on-year growth of over 30% in the first three quarters of 2021, ranking first in all channels across the industry. The business is also making rapid progress in 2022, with a growth rate of nearly 20% in January, far ahead of both its domestic and foreign counterparts.
Ausnutria, which is also a major player in China’s infant formula market, owns the best-known goat milk formula brand worldwide. According to Nielson, Ausnutria has enjoyed a market share of over 60% in China’s total goat milk formula imports since 2018 and clinched the leading position in total sales of goat milk formula worldwide.
Based upon the integration of the milk powder and goat formula businesses, as well as its established competitive strengths and rapid growth, Yili will stand out as a new market leader.
In addition, Ausnutria has also established a comprehensive layout in nutrition products such as dietary supplements, probiotics, and food for special medical purposes, and it is developing into a high-end nutrition product and health service provider covering all ages and the full life cycle. At this point, the integration of optimal resources from both sides will facilitate Yili’s access to the nutritional products market, further bolstering its efforts to become a healthy food provider.
Analysts also believe that Yili’s M&A is a key step towards achieving its medium-term goal by 2025. Yili has put forward the medium- and long-term strategic goals of becoming one of the top three dairy firms in the world by 2025 and the largest dairy firm by 2030. As previously forecasted by S&P, Yili could become ranked among the top three globally by 2025 through its organic growth alone. The full acquisition of Ausnutria will further strengthen its advantage in terms of scale as a market leader and accelerate the pace of realizing its medium- and long-term strategic goals.