Using European Union (EU)-standard raw milk provided by Huishan, the proposed joint venture will “leverage the respective experience and expertise” of both firms to produce, market and sell a new range of “high-quality” infant formula products.
Under the terms of the proposed venture, FrieslandCampina and Huishan will jointly own an existing infant formula production plant in Liaoning, and will also share sales and marketing responsibilities.
In China, FrieslandCampina is known for its Netherlands-made Friso premium infant formula brand and for supplying ingredients to Chinese food and infant formula manufacturers, while Huishan boasts a wide range of dairy products under its Huishan brand.
Huishan and FrieslandCampina will continue to run their existing infant formula businesses separately.
In advance of the announcement detailing its proposed joint venture with FrieslandCampina, Huishan requested a halt in the trading in its shares on the Stock Exchange of Hong Kong.
Trading of Huishan shares was suspended yesterday (8 May 2014) following the request, but has since resumed.
In a document filed with Hong Kong Stock Exchange, Huishan Dairy said that the joint venture, if successfully established, will be mutually beneficial for it and FrieslandCampina.
“The Directors believe that the Proposed Joint Venture, if successful, will be an important step for the Group to further develop and enhance its production, sales and marketing capabilities. Through the partnership with FrieslandCampina, the Group will be able to leverage of the experience, know-how and sales network of FrieslandCampina,” said the statement.
“The Directors believe that the Proposed Joint Venture will mutually benefit the parties in their respective production, sales and marketing capabilities both on a local and international scale," it added.
The talks between FrieslandCampina and Huishan were revealed just a week after the latter was forced to reassure the Stock Exchange of Hong Kong that an increase in the trade and a decrease in the price of its shares was "unrelated to the Group's business operations."
Concerns were raised in April 2014 when two shareholders, An Yu Investments Limited and Hero-owned Spring Harvest Limited, between them disposed of more than 800m shares representing almost 5.6% of those issued.
"Both An Yu and Hero informed the Company that their respective disposal of Shares was based on their own investment decisions and are unrelated to the Group's business operations," said the Stock Exchange of Hong Kong filing.
Huishan also revealed in the filing that is was "under discussion with third parties for potentially establishing joint venture in relation to the sale and production of liquid and/or powdered dairy products."