Beingmate joins Shenzhen selloff to trade 12% below price Fonterra paid for 18.8% stake

UPDATE: Beingmate slides further in Shenzhen tumble

Beingmate Baby & Child Food Co shares have halved in value on the Shenzen stock exchange over the past three weeks, pushing their price 12% below what Fonterra Cooperative Group [NZX: FCG] paid for its 18.8% stake in the Chinese infant formula maker.

Beingmate shares closed at 15.82 yuan yesterday, below the 18 yuan apiece, or 3.46 billion yuan that the Auckland-based dairy cooperative paid for 192.4 million shares in March. The shares have halved from a record 30.95 yuan on the Shenzhen exchange in mid-June as the tech-heavy Chinese stock exchange abruptly pulled back after surging 100% since the start of the year. (See graph below)

Fonterra and Beingmate announced their global partnership last August to help meet China's growing demand for infant formula and increase export volumes of Fonterra's Anmum infant formula brand. At the time, the world's largest dairy exporter had been hoping for a 20% stake in the company, and flagged it would cost nearly $615 million.

Last month, Fonterra sold its third dim sum bond, raising 1 billion yuan, or $230 million, with the proceeds helping to fund the stake in Beingmate.

The partnership will create a fully integrated global supply chain from the farm gate direct to China's consumers, using Fonterra's milk pools and manufacturing sites in New Zealand, Australia, and Europe. The Chinese government last year imposed stricter regulations on products such as infant formula amid concerns over food safety.

In February, Beingmate reported a 90% drop in operating profit in its preliminary results for the 2014 financial year to 65.7 million yuan, compared to 721 million yuan the previous year. Revenue was also down by 17%.

Units in Fonterra Shareholders' Fund, which give holders access to the cooperative's dividend stream, rose 0.2% to $4.89. The units touched a record low of $4.58 in mid-June after Fonterra posted a 16% drop in first-half profit to $183 million in the six months to January 31, which it said reflected tough conditions in dairy, while also trimming its guidance for dividends to a range of between 20-30c, from a previous range of 25-35c.

(BusinessDesk)