Bright Food to buy 56% stake in Tnuva
May 22 2014 10:54 PM
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Bright Food yoghurt is for sale in Beijing. The Chinese firm yesterday struck a deal to buy control of Israel’s largest food company Tnuva.

Reuters/Shanghai/Tel Aviv



China’s Bright Food Group Co has struck a deal to buy control of Israel’s largest food company, gaining new products and technology as it chases rivals that have overtaken it in China’s fast-growing cheese and dairy markets.
State-owned Bright Food said yesterday it would buy 56% of dairy firm Tnuva from private equity house Apax, under the terms of a preliminary
accord.
Bright Food did not disclose the sum, but Israel’s Mivtach Shamir Holdings, another major shareholder in Tnuva, said the deal valued all of the dairy company at about $2.5bn, up from $1bn when Apax and Mivtach took control in 2008.
The deal, the latest in a multibillion dollar overseas acquisition spree by Bright Food, will give the Chinese firm access to new cheese products and the Israeli firm’s technological know-how in dairy production, trade sources and analysts said.
Best known for its cottage cheese, Tel Aviv-based Tnuva had 2013 revenue of 7.17bn shekels ($2.05bn) from the sale of a range of cheeses, as well as milk, yoghurt, meat and eggs.
The sale of one of Israel’s leading companies has been strongly criticised by some Israeli lawmakers.
“What normal country puts its food security and its entire milk industry in the hands of China?” said opposition member of parliament Shelly Yachimovich, who called for Tnuva instead to be floated on the Tel Aviv Stock Exchange.
But Israel’s government has recently been encouraging more Chinese investment in the country.
The deal is one of the biggest ever in Israel’s consumer goods market. While large foreign acquisitions of Israeli high-tech firms are common, companies focused on its small domestic market are viewed as less attractive.
The investment comes as increasingly affluent Chinese consumers opt to pay more for imported goods in the wake of safety scandals in local food supply chains, attracting the attention of global food giants as well as China’s producers.
The Chinese cheese market will be worth 2.7bn yuan ($433.13mn) this year, doubling to 5.3bn yuan by 2018, according to consultancy Euromonitor.
“China is still a niche market but there’s lots of room for growth. We’re getting increasing interest from international clients who are interested in China,” said Matthieu David-Experton, Shanghai-based CEO at Daxue Consulting.
“The imported aspect is key because it makes it a more premium product in China and plays into the food safety trend,” he said.
Mivtach said it was holding talks with Bright Food as to whether it will join Apax in the deal and sell its 21% stake in Tnuva. Mivtach has a “tag-along” option giving it the right to sell its stake together with the Apax sale.
Bright Food will pay Apax slightly less than $1bn in cash for its 56% stake and will assume Apax’s share of bank loans totalling 1.9bn shekels, said a source with knowledge of the deal. If it also buys Mivtach’s stake then Bright Food will take on the full loans amount. No deal with the banks has been reached yet.  One option being considered by Bright Food is to bring in a partner, Chinese state-supported private equity firm Sailing Capital Management, to buy Mivtach’s stake, the source said.  
A group of kibbutzim, or co-operative farms, own the rest of Tnuva. Bright Food said it would look to strengthen cooperation with smaller shareholders, rather than buy them out, and hopes to close the deal by the end of the year.
As China’s cheese market has developed, Bright Food has lost out. The country’s dominant cheese producer with a quarter of the market by value in 2009, it dropped down to 8.3% last year, according to Euromonitor data.
The deal could also give Bright Food access to Tnuva’s dairy processing technology, increasing its dairy output, analysts said. Bright Food was China’s fourth-biggest dairy producer last year by retail value.


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