Bright Food (Group) Co Ltd's display at a trade show in Shanghai. Provided to China Daily

Tnuva acquisition to beef up Chinese conglomerate's foreign asset portfolio

Bright Food (Group) Co Ltd, China's second-largest food vendor, announced on Wednesday it is acquiring a majority stake in an Israeli counterpart, demonstrating its commitment to overseas expansion.

The purchase from London-based private equity fund Apax Partners, will give Bright Food a 56 percent stake in Tnuva, Israel's largest food company, Bright Food spokesman Pan Jianjun told China Daily.

Pan did not disclose financial details, saying it is a "preliminary agreement" and still subject to relevant government approval. But The Wall Street Journal said last September that the deal may be worth as much as $2.43 billion.

"Bright Food will maintain Tnuva as an Israeli company and will continue to partner with all its stakeholders, including employees, clients, farmers and the Cattle Breeders Association to best serve the Israel consumer," Bright Food said in a statement.

The cooperation will deliver an international platform for Tnuva's future development, it added.

Tnuva, whose products include cottage cheese and dairy products found in almost every Israeli refrigerator, controls about 14 percent of shelf space in the country, according to Apax's data.

China's imported dairy products will exceed 20 percent growth in 2014 as continued urbanization pushes up demand and a lack of large dairy farms limits supply, according to a study by Rabobank Nederland in March.

Bright Food commands a 5.7 percent share of China's 174 billion yuan ($28.5 billion) dairy market and ranks fourth in the domestic market, according to Euromonitor International.

The deal will help Bright Food boost its business at a time when major players are vying for a bigger share of China's burgeoning dairy sector. French food conglomerate Danone SA raised its stake in China's biggest dairy producer, Mengniu Dairy Co, earlier this year.

The Tnuva deal marks Bright Food's latest overseas acquisition, as the Shanghai-based firm hopes to have foreign assets account for 25 percent of its total in three years' time. It bought UK-based Weetabix Food Co in 2012 and Australia's Manassen Foods in 2011, among other international purchases.

Such widely scattered assets will serve to enrich its product line and optimize distribution channels, Pan noted. Bright Food also is contemplating an eventual listing of some of its foreign assets.

For both parties, a guiding principle in the post-acquisition period is to "respect, tolerate and trust" each other, Pan said.

It is in line with an earlier arrangement achieved by Bright Food and Australian takeover target Mundella, whose daily operations are overseen by mostly local executives.

When going global, Chinese firms should learn to form a sound relationship with key middlemen such as law firms, accounting agencies and banks, company vice-president Ge Junjie told China Daily in an earlier interview.

"Chinese companies are embracing the world with friendliness and inclusiveness. But to seal any business contract, mutual respect is a precondition," he said.

hewei@chinadaily.com.cn