Lactalis International agreed to buy an infant-formula business from Aspen Pharmacare Holdings Ltd for 739.8 million euros ($860 million) as the French dairy group targets the fast-growing Chinese market.
The move will enable the closely held company to tap rising demand for baby-food in Asia’s biggest economy following the scrapping of its one-child policy around 2016. Furthermore, Chinese consumers have showed a preference for foreign brands in the wake of a scandal that poisoned thousands of children a decade ago.
“This operation will accelerate the group’s development on the global nutrition market and is complementary to the existing nutrition business,” Lactalis said in a statement on Thursday, confirming a Bloomberg News report that the deal was close to completion.
For Aspen’s part, the sale will enable Africa’s biggest drugmaker to focus on its main pharmaceutical operations, the Durban, South Africa-based company said in a separate statement. The company sells products such as hormones, anesthetics and anti-retroviral medicines in more than 150 countries and has been weighing options for the infant formula division, known within the firm as global nutritionals, for most of the year.
Lactalis, based in Laval in western France, has been growing by acquisition under Chief Executive Officer Emmanuel Besnier, the founder’s grandson. Among notable deals, the company bought the French baby-milk business of Royal Numico NV in 2008 after that firm’s sale to Danone SA. In 2011, Lactalis acquired Italian dairy producer Parmalat SpA, and last year it purchased Stonyfield, Danone’s U.S. organic yogurt brand.
The company, known for its President brand of brie cheese, ran into trouble in France last year when 35 children fell ill from salmonella-contaminated baby food produced by Lactalis, with government officials saying it didn’t handle the recall properly. The company also has sparred with dairy farmers over milk prices in recent years.
Besnier, 47, is one of France’s richest people, with a net worth of $7.6 billion, according to the Bloomberg Billionaires Index. He’s known for avoiding the media and almost any public exposure.
Aspen’s infant formula unit contributed 3.09 billion rand ($206 million) to revenue and 512 million rand to profit in the year through June. The company has been using the division to drive a push into China, where it gained approval to sell its Alula formula products earlier this year.
Full-year earnings per share excluding one-time items rose 10 percent to 16.05 rand per share, Aspen said. The company increased the dividend by 9.8 percent to 3.15 rand a share.
The shares have gained 2 percent this week, buoyed by reports of the infant formula unit sale. That values the company at 124 billion rand.