New Zealand-based dairy co-operative Fonterra is planning to divest its stake in the China-based baby food manufacturer Beingmate Baby & Child Food Company.

Currently, Fonterra owns an 18.8% stake in the Chinese firm.

Fonterra chief executive Miles Hurrell said: “One aspect of this plan was to take stock of our business. As part of this, we have re-evaluated every investment, major asset and partnership to ensure they still meet the co-operative’s needs today.

“This started with a strategic review of our relationship with Beingmate, which has been disappointing. The first action in this review was bringing the distribution of Anmum in China back in-house under our management.

“We then ended the Darnum joint venture with Beingmate, bought back Beingmate’s share of our Darnum facility in Australia, and entered into a multi-year agreement for Beingmate to purchase ingredients from us.”

The intent to divest its stake is part of the company’s three-point plan to turn around the business.

Hurrell also explained that the company spoke to various parties for divesting its stake in the company, but negotiations with all the parties were unsuccessful.

As per Shenzhen Stock Exchange market rules, companies are onlu allowed to divest a 1% stake for every 90 days directly on the exchange, or else sell 2% in a single block every 90 days.

Through an off-market transaction, companies are also allowed to divest more than 5% stake to an individual party.

Hurrell further added: “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. From here, it’s about making pragmatic decisions to get the best outcome for the co-op from our holding in Beingmate.

“China will always be one of our most important markets. We’ve got a strong business there and are still very much focused on the areas in China wher we can succeed.”

In March 2015, Fonterra acquired an 18.8% stake in Chinese infant formula manufacturer Beingmate Baby and Child Food Company for €525m.

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