Megmilk shares hit record on Wahaha stake talk
TOKYO - Megmilk Snow Brand Co, Japan's third-largest milk producer, surged by a record in Tokyo trading on speculation China's Hangzhou Wahaha Group Co may buy a stake. However, Megmilk said it isn't in talks with Wahaha.
The Japanese company rose as much as 6.5 percent to 1,567 yen ($19) on the Tokyo Stock Exchange, the biggest intraday gain since it sold shares in October 2009, and traded at 1,500 yen at 12:46 pm local time. The benchmark Topix index fell 1.4 percent.
A Japanese yogurt maker recently approached Wahaha, China's third-biggest soft-drinks maker, about acquiring it, said Hangzhou Wahaha Group Chairman Zong Qinghou, at a briefing in Beijing on Sunday. Talks haven't started, he said, without giving more details.
"Megmilk is likely being bought on speculation that Hangzhou Wahaha group may make a bid for the company," said Stephen Patrick, a director at Tokyo-based MF Global FXA Securities Ltd.
Megmilk, based in Sapporo, isn't in talks with Hangzhou Wahaha Group about a possible acquisition, Masanao Hiei, a spokesman for the Japanese company, said on Monday. Shan Qining, a spokesman for Wahaha, declined to comment.
"Some small and mid-sized companies may be approaching Wahaha as they struggle in the domestic yogurt market, where major companies dominate," said Mikihiko Yamato, an analyst at Japaninvest KK in Tokyo. New products to be introduced by Megmilk this month may help spur domestic sales next fiscal year, he said.
Snow Brand Milk Products Co reunited with affiliate Nippon Milk Community Co in 2009 to form the dairy company after a tainted-milk scandal in 2000 prompted it to separate the businesses in 2003. Megmilk competes with Meiji Holdings Co and Morinaga Milk Industry Co, Japan's two biggest makers of dairy products.
Zong has said he wants to buy overseas companies that make products China lacks and which Wahaha can then sell domestically. The beverage maker, whose name means "laughing child" in Chinese, aims to boost sales 27 percent this year to 70 billion yuan ($10.7 billion).
Wahaha, based in the eastern Chinese city of Hangzhou, accounts for 9.7 percent of China's dairy market, the third-largest share after China Mengniu Dairy Co and Inner Mongolia Yili Industrial Group Co, according to data from Euromonitor International.
Zong said earlier he plans to venture into retailing by opening 100 department stores. "We are in talks with many local governments as establishing big stores require land," he said.
"By setting up our own shops, we can have more say in the distribution" of Wahaha's products, including carbonated drinks and mineral water, he said.
Bloomberg News
(China Daily 03/08/2011 page17)
