Danone may sell Dumex to Mengniu

Danone plans to sell the Dumex infant formula brand to a unit of China Mengniu Dairy Co amid a downturn in demand for locally made baby food in that market.

Danone has agreed to sell Dumex to Yashili International Holdings Ltd, and will use the proceeds from the sale to take up more shares in Mengniu, a State-linked milk producer, the two Chinese companies said in a statement on Friday. The Paris-based food company separately said it took an impairment charge of 398 million euros ($437 million) as it revised Dumex's sales prospects lower.

The infant formula industry "is not a very attractive business to be in right now", said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. "It is not doing well and there is too much competition. Mengniu can run the business better than Danone can in China, due to their distribution network."