Bright Food Said to Pay $960 Million for Tnuva Stake

Bright Food Group Co., the Chinese dairy and consumer-products company, is paying about $960 million for a majority stake in Israel’s Tnuva Food Industries Ltd., according to a person with knowledge of the matter.

Bright Food has reached a preliminary agreement with Apax Partners LLP, a private-equity firm that has invested in Tnuva, to acquire 56 percent of the Israeli company, Pan Jianjun, a spokesman for the Chinese company, said in a mobile-phone message today. He said the price has yet to be decided and declined to comment further.

The deal would give Bright Food a broader range of high-quality products to bring into China to tap the local demand, said Torsten Stocker, a partner at consulting firm A.T. Kearney. “You are also building a portfolio of brands in different markets,” he said, adding he expects more acquisitions to come.

Chinese companies from Bright Food to pork producer WH Group Ltd. have been making acquisitions overseas as rising incomes spur demand for consumer goods while a series of food-safety scandals has hurt confidence in local brands. Bright Food bought a 60 percent stake in British cereal maker Weetabix Ltd. in 2012.

Valuation

The transaction values Tnuva at 8.6 billion shekels ($2.5 billion), Mivtach Shamir Holdings Ltd. (MISH), Tnuva’s second-largest shareholder with 21 percent, said today in a filing to the Tel-Aviv Stock Exchange. The investor may stay with Tnuva or it may sell its stake to Bright Food, it said today.

Bright Dairy & Food Co. (600597), the Shanghai-listed unit of Bright Food Group, rose 2.3 percent to close at 18.29 yuan in the city. The shares have dropped 18 percent this year, compared with a 4.5 percent decline in the benchmark Shanghai Stock Exchange Composite Index.

Citigroup Inc. advised Bright Food on the deal, according to an e-mailed statement from the bank today.

Demand in China for liquid milk products may almost double to 259 billion yuan ($42 billion) in 2016 from 139.5 billion yuan in 2010, according to Euromonitor International. Bright Dairy, which sells products such as UHT Milk, yogurt and milk powder in China, had 7.6 percent of the milk market in 2012, trailing China Mengniu Dairy Co. and Inner Mongolia Yili Industrial Group Co., Euromonitor data shows.

Agricultural Cooperative

The rising demand has attracted foreign investors such as RRJ Capital and Danone, the world’s biggest yogurt maker. RRJ, a private-equity fund run by former Goldman Sachs Group Inc. partner Richard Ong, agreed in February to acquire 45 percent of a unit of Bright Dairy for 1.53 billion yuan, according to a stock exchange filing. Paris-based Danone said the same month it would pay 486 million euros ($665 million) to more than double its stake in China Mengniu.

Tnuva owns seven of the 10 best known food brands in Israel and accounts for more than 14 percent of shelf space in the country’s supermarkets, according to Apax’s website.

Tnuva was formed more than 80 years ago as an agricultural cooperative of 620 farming communities across the country, who were also the company’s suppliers of raw milk and produce, according to Apax. Members of the cooperative approved the sale of a majority stake in Tnuva to Apax in 2007 at a price that valued the company at $1.03 billion at the time.

Apax owns 56 percent of Tnuva, according to the food manufacturer’s website.

Bright, which has retail outlets across China, also operates tea, dairy and rice farms. It was established by merging four state-owned companies in 2006.

Pork producer Shuanghui International Holdings Ltd. agreed to acquire Smithfield Foods Inc. for about $4.72 billion in May 2013.

To contact the reporters on this story: Liza Lin in Shanghai at llin15@bloomberg.net; Stephanie Wong in Hong Kong at swong139@bloomberg.net; Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Terje Langeland, Thomas Mulier

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