The latest fall in Chinese share prices means Fonterra’s stake in the Beingmate infant formula maker is worth $200 million less than it paid for it.
Beingmate Baby & Child Food Co shares have fallen to their lowest since February 2013, after being caught up in the global sharemarket rout, slicing more than $200 million from Fonterra’s investment in the Hanzhou-based infant formula maker.
The Shenzhen stock exchange-listed shares dropped 10 per cent to 11.87 Chinese yuan, the lowest level since New Zealand dairy exporter Fonterra paid 18 yuan a share for an 18.8 per cent stake in the Chinese infant formula maker.
Beingmate’s shares had recovered after more than halving in value in July, but have tumbled 19 per cent in the latest Chinese equity selloff.
China’s sharemarkets have been hit the hardest over the past three days after a gauge of manufacturing hinted at a slowing economy in the world’s most populous nation, spooking investors across the globe.
The Shanghai Composite Index was down 4.1 per cent in early trading, following an 8.5 per cent slump on Monday.
In March, Fonterra paid 3.46 billion yuan for the stake, or $756 million, at the time.
That’s dropped to 2.28 billion yuan at Tuesday’s price, and $546.5 million at the current cross-rate.
Fonterra and Beingmate announced their global partnership last August to help meet China’s growing demand for infant formula and increase export volumes of Fonterra’s Anmum infant formula brand.
At the time, Fonterra had sought as much as 20 per cent of the company, and flagged it would cost around $615 million.
Tumbling global dairy prices and “high debt” after buying the Beingmate stake prompted ratings agency Standard & Poor’s earlier in August to put Fonterra’s A long-term and A-1 short-term ratings on CreditWatch negative.
Source: NZ City