Fonterra to sell down Beingmate shares at heavy loss
Fonterra is poised to crystalise huge losses by selling down its shares in Chinese infant formula manufacturer Beingmate at less than a third of what it originally paid for its stake.
The actual investment loss could run into hundreds of millions of dollars, although Fonterra has already written down the investment by more than $430 million on its balance sheet.
The dairy co-operative yesterday confirmed its intention to sell a portion of its 18.8 per cent stake with chief executive Miles Hurrell saying the decision was part of Fonterra’s three-point plan to turn around its business.
Fonterra paid 18 yuan per share for its Beingmate shares for a total outlay of NZ$755m as part of a joint venture partnership. It has since written down the carrying value to $204m after a string of heavy losses decimated Beingmate’s market value.
Beingmate shares last traded on the Shenzhen Stock Exchange at 4.94 yuan.
Fonterra has been reviewing its overseas businesses since reporting a historic first annual loss of $196m and debt of $6.2 billion last year. The poor figures reflected a $439m writedown on Beingmate.
“We have talked to a number of parties regarding the potential sale of our entire stake in Beingmate, but so far have been unsuccessful in finding a buyer,” Hurrell said in a statement.
“As a result of this, we are now considering selling part of our holding and, as required by local listing rules, need to pre-announce our intention.”
Under Shenzhen Stock Exchange rules it is only possible to sell up to 1 per cent every 90 days directly on the exchange, or sell up to 2 per cent in a single block every 90 days.
However, trades greater than 5 per cent can be made to an individual party in an off-market transaction.
“From here, it’s about making pragmatic decisions to get the best outcome for the co-op from our holding in Beingmate,” said Hurrell.
Fonterra has already unwound its joint venture arrangement with Beingmate, taking back full ownership of the Darnum manufacturing plant in Australia.
When Fonterra invested in Beingmate in 2015 it said the deal would give access to the lucrative Chinese market for its infant formula and other products.
Beingmate originally had sole rights to distribute Fonterra’s popular Anmum brand in China but that ended as the two companies fell out over strategy and governance issues.