Yili Joins Hands with Ausnutria,

Becoming Its New Single Largest Shareholder After CITIC Agri Fund

 

Ausnutria Dairy Corporation Ltd (1717.HK, "Ausnutria" or the "Company" or the "Listed Company") announced that the Company's major shareholders and the Company entered into a share purchase agreement with Hong Kong Jingang Trade Holding Co., Limited ("Jingang"), a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group Company Limited ("Yili"), pursuant to which:

 

1. Jingang acquired a total of 530,824,763 shares of Ausnutria held by Citagri Easter Ltd. ("Citagri", a wholly-owned subsidiary of CITIC Agri Fund), Center Laboratories, Inc. ("Center Laboratories") and its related company BioEngine Capital Inc. and Dutch Dairy Investments HK Limited (a wholly-owned subsidiary of Mr. Bartle van der Meer) (collectively, the "Purchasers") at a price of HK$10.06 per share. The total consideration for the transactions under the share purchase agreement amounted to HK$5,340,097,116, representing approximately 30.89% of the total number of issued shares of Ausnutria;

 

2. Ausnutria issued 90 million new shares to Jingang at a price of HK$10.06 per share. The proceeds of HK$905,400,000 will be used to further enhance Ausnutria's research and development, production, sales and distribution capabilities and optimize its financial structure.

 

3. According to the arrangement of the transaction agreement, Jingang will hold a total of 620,824,763 shares of Ausnutria, representing 34.33% of its total number of shares after the expansion, after acquiring the shares of Ausnutria held by the sellers and subscribing for the new shares issued by Ausnutria, involving an amount of HK$6,245,497,116. According to the Codes on Takeovers and Mergers and Share Buy-backs of the Securities and Futures Commission of Hong Kong, the transaction will trigger a general offer and Jingang shall make a mandatory general offer for all issued shares of the Listed Company and initiate the transaction in accordance with the relevant provisions.

 

Yili becoming the single largest shareholder of Ausnutria

 

If the above two transactions are successfully completed, Yili will indirectly hold 620,824,763 shares of Ausnutria, accounting for 34.33% of Ausnutria's total number of shares after the expansion, making it the single largest shareholder of Ausnutria. Dairy industry giant Yili's acquisition of segment leader Ausnutria is also the largest investment and merger and acquisition between dairy companies in China this year.

 

Citagri and Center Laboratories will continue to hold certain shares of Ausnutria as they are firmly optimistic about the market of China's dairy industry and the development potential of Ausnutria. Upon completion of the transactions, the shareholdings of the top 5 shareholders of Ausnutria will be changed as follows: Jingang holding 34.33%; Center Laboratories, Inc. holding 7.23%; Mr. Yan Weibin (Chairman of Ausnutria) holding 6.71%; Bartle van der Meer (CEO of Ausnutria) and his wholly-owned subsidiary jointly holding 5.23%; and Citagri Easter Ltd. (a wholly-owned subsidiary of CITIC Agri Fund) holding 5.11%.

 

"CITIC Agri Fund has witnessed first-hand the rapid development of Ausnutria in the past three years. Behind the Company's proud performance is firm strategic determination, advanced management experience, excellent corporate culture and outstanding management team, and the addition of new shareholder will help the Company achieve long-term development," said Qiao Baijun, general manager of CITIC Agri Fund, adding that during the three-year period of CITIC Agri Fund's shareholding in Ausnutria, the Company has experienced rapid development, with operating income doubling from RMB4 billion to RMB8 billion and net profit increasing from RMB300 million to RMB1 billion, representing a growth of over three times. With the introduction of Yili, a leader in dairy industry, the shareholder structure of Ausnutria will be more reasonable. Industrial investors with strength will surely bring more high-quality resources, longer-term investment commitments, more extensive culture and management experience, empowering Ausnutria to cope with future competition and create greater value.

 

According to the announcement, after completion of the transaction and closing, Yili will continue to support the independent operation of Ausnutria and maintain its listing status on the Hong Kong capital market, and no significant changes will be made to Ausnutria's existing operations and business. Yili will help Ausnutria improve its long-term business development plans and strategies, fully utilize the synergies between two parties, thereby promoting the continuous and healthy growth of Ausnutria.

 

Yili's investment in Ausnutria not only echoes the policy direction, but also enables the two sides to complement each other well

 

In order to achieve comprehensive development of the dairy industry and effectively improve the quality, efficiency and competitiveness of China's dairy industry, China has introduced a series of policies in recent years to encourage dairy enterprises to increase integration, improve quality and capabilities, and put more efforts in overseas expansion to participate in international competition. Yili's investment in Ausnutria represents a positive action made by the two companies to respond to the call of the national policy of promoting the development of the dairy industry.

 

Mr. Pan Gang, Chairman and president of Yili Group, said that after in-depth study and communication, Yili recognizes the steady growth, solid market performance, visionary strategic layout and comprehensive product lines of Ausnutria, the excellent operation ability of Ausnutria's management team, and its relentless pursuit of health business. In particular, Yili expressed its high appreciation for Chairman Yan Weibin's leadership of Ausnutria's management team, which was able to overcome the inherent disadvantage of Hunan's lack of milk supply and take a unique path of international development. Mr. Pan Gang stated that in the future business development, Yili will continue to support the stability of the Ausnutria team and have full trust in its operation. It is hoped that the management team of Ausnutria will maintain the steady development of the Company with strong cohesion and execution, and achieve a sustainable growth in operating results.

 

"Driven by multiple favorable factors such as national policy support, rising healthcare demand of consumers and the booming development of the healthcare industry, the dairy industry and the health food industry have a bright future, especially in the nutrition and milk powder categories." Mr. Pan Gang stated that, based on the shared strategic vision, corporate values and mutually trusted partnership, the two parties will be able to work together to create value and build a better "global health ecosystem", thereby promoting better development of China's dairy industry and the global health food industry.

 

Cooperation between Ausnutria and Yili may achieve 1+1>2 in the global market

 

"The strategic cooperation between Yili and Ausnutria is the result of the compatibility of the two companies' missions, visions and values as well as the convergence of their development strategies." Mr. Yan Weibin, Chairman of Ausnutria, said the two companies have good complementarities in upstream milk source layout, R&D innovation, supply chain construction, product portfolio, talent training, international expansion, brand building and terminal channel development. Both companies have gone global from areas with relatively weak commercial fundamentals in mainland China, and share the traditions of hard work, courage, commitment, innovation and pursuit of excellence. Ausnutria values Yili's strength as a leading enterprise and Chairman Pan Gang's outstanding leadership and strategic vision and perspective in leading China's dairy industry to the world. It is believed that through such cooperation, the two companies can generate great synergy in the global market with many advantages from the cooperation and achieve strategic development of 1+1>2 in the future.

 

In fact, the largest shareholder of Ausnutria has changed three times in the past six years, including Center Laboratories in Taiwan and CITIC Agri Fund, all of which have greatly contributed to Ausnutria's management and performance improvement, and established Ausnutria's position in the industry. Mr. Yan Weibin said that Yili is the first Chinese company to rank among the top players in the global dairy industry and is a role model and pride of Chinese companies. For Ausnutria, the introduction of a strategic investor like Yili may not only create synergy in the industrial chain, but also provide management and strategic empowerment, which will facilitate Ausnutria in securing a top three position in the industry and accelerate its pace of globalization. In the future, Ausnutria will continue to insist on "overcoming market uncertainty with strategic certainty" and continue to focus on value creation to achieve better and faster development of the Company.

 

Currently, Yili is among the top-ranked dairy companies in the global dairy industry and has been the No. 1 dairy company in China and Asia for many years, and is also the largest and most comprehensive dairy company with highest market value in China. Ausnutria is a fast-growing international infant formula and nutrition and healthcare product company that has built up its R&D strength and supply chain globally in recent years. In particular, Kabrita goat milk formula has secured its globally leading position in the segment market. Ausnutria's coverage in nutritional products and probiotics will also complement Yili's business. Under the background of China's new development pattern of "dual circulation", the two companies will have a lot of opportunities for collaboration in research and development, supply chain, marketing, channels and other business aspects, which will be beneficial for the development of the two companies, for consumers, and for the development of China's infant formula and other special food industries. The cooperation between the two sides is also a positive response to the new national policy that encourages dairy enterprises to join forces and become stronger, and will certainly make a greater contribution to strengthening Chinese enterprises and the construction of a healthy China.

 

About Ausnutria Dairy Corporation Ltd

Ausnutria Dairy Corporation Ltd is a leading infant milk formula company with production facilities principally based in the Netherlands, the PRC, Australia and New Zealand. The Company is engaged in the worldwide production, R&D, and sales of infant formula, adult milk formula and other dairy and nutrition products. It owns several famous infant formula brands, including "Kabrita", "Allnutria" and "Hyproca". Ausnutria's factories in the PRC were among the first batch of factories that had been granted with the National Infant Formula Enterprise Production Permit. The factories in the Netherlands and Austrilia of Ausnutria were also among of the first infant milk formula manufacturers to obtain import licenses for overseas products under the new policy in the PRC.