News Desk |
Fauji Foods Limited, sister company under the Fauji Group umbrella, is keen on retaining at least 25% shares following a potential deal with Chinese food giant, Inner Mongolia Yili Industrial Group.
Officials from Fauji Fertiliser Bin Qasim Limited (FFBL) have disclosed that talks between both parties regarding an acquisition of over 51% voting shares and control of Fauji Foods by the Yili Group have now reached a critical level. However, Fauji Foods has made it clear that it wishes to keep 25-35% holdings in company shares in order to continue capitalizing on the dairy business both domestically and abroad.
The company is looking to establishing dairy farms to meet demands of a global supply chain as it continues to expand.
In a statement made to the press, FFBL Company Secretary Syed Mujtaba Tirmizi was heard saying, “Business models, based on joint ventures, are becoming successful globally and we also want a joint venture with the Yili Group through this acquisition.” He also revealed that the Chinese company wished to hold significant shareholdings in Fauji Foods stating that they also believe in long-term partnerships.
With regards to the acquisition, Tirmizi termed this as possibly the biggest foreign investment in the country since recent times. Although Yili will hold the majority of shares in the company Tirmizi was confident that the remaining shares would be enough to “make a great impact”.
The Fauji Group had earlier in September of 2015 acquired around 51% shareholdings in the food company in a deal with Noon Group for Rs700 million. Currently, Fauji Group shareholdings in the food company stand at 63.34%.
Read more: Govt. plans to moderize milk and meat industry for boosting output
It’s noteworthy to mention that the Noon Group still retains around 11% stake in Fauji Foods. Company executives also predict that Yili will end up buying differently funded shares from the open market in order to get control rights within the company. According to them, this would leave only 10% shares of Fauji Food on the open market.
Fauji Foods has also invested around Rs 12 billion in equities and manufacturing upgrades bringing about a turnaround worth Rs. 6 billion in only the first three quarters of the current fiscal year. The Yili Group also happens to be the largest producer of dairies in Asia and is currently ranked at 8th position internationally. The Chinese dairy producer mainly processes, produces and distributes Halal dairy products and combinations of livestock feedstuff.
The Fauji Group had earlier in September of 2015 acquired around 51% shareholdings in the food company in a deal with Noon Group for Rs700 million.
By December’s end, the Chinese dairy giant would have racked up $8.66 billion in annual sales . Yili’s acquisitive ambitions in Fauji Foods were made official in July of 2018. Only last month, a senior team led by a high-level strategist from the Chinese firm made a visit to Pakistan to conduct market surveys and visiting milk plants, urban markets, dairy producers for evaluation.
Read more: Chinese wooed to invest in Pak Food Industry
In a similar fashion, the top brass from FFBL have visited China by the end of October while a second visit by Yili’s top management to discuss the intricacies of the transaction was scheduled to take place in November. The Yili Group has an advantage in terms of global expertise as well as a research and development division. The company is looking to establishing dairy farms to meet demands of a global supply chain as it continues to expand.
Fauji Foods, on the other hand, is looking to learn from Chinese expertise which it needs to stay competitive in the market where two multinational food giants, Nestle and Engro Foods, already operate. “We as a company will go for better business practices after the acquisition,” Tirmizi added.
He also stated that since Pakistan’s domestic market is still open with 90% of the market having yet to shift to UHT milk by 2021, it is a tremendous opportunity to create an export market countries in the Middle East.