--- title: "Shengmu's Piecemeal Sale: The Intellectual Contest Among Pan Gang, Lu Minfang, and Yao Tongshan" description: "The contest among three top Chinese dairy executives has concluded. Pan Gang, Lu Minfang, and Yao Tongshan each demonstrated their distinct styles in the sale of Shengmu. Yesterday, Shengmu announced that Mengniu invested 303 million yuan for a 51% stake in a joint venture, with Shengmu holding the remaining 49%. Notably, Mengniu only acquired Shengmu's downstream production, processing, and sales operations, not its 116,900 dairy cows as of June 30, 2018." author: "乳业专业优质媒体" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2018-12-25" language: "en" canonical: "https://xinjignxiao.com/en/articles/shengmu-s-piecemeal-sale-the-intellectual-contest-among-pan-gang-lu-minf-4943ec56/" markdown: "https://xinjignxiao.com/en/articles/shengmu-s-piecemeal-sale-the-intellectual-contest-among-pan-gang-lu-minf-4943ec56.md" original_source: "https://mp.weixin.qq.com/s/idI7XXMuOpOAhXVoiAG-lw" translation: "https://xinjignxiao.com/zh/articles/%E5%9C%A3%E7%89%A7%E6%8B%86%E5%8D%96-%E6%BD%98%E5%88%9A-%E5%8D%A2%E6%95%8F%E6%94%BE%E4%B8%8E%E5%A7%9A%E5%90%8C%E5%B1%B1%E7%9A%84-%E6%99%BA%E5%8A%9B%E7%AB%9E%E8%B5%9B-4943ec56.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/shengmu-s-piecemeal-sale-the-intellectual-contest-among-pan-gang-lu-minf-4943ec56/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Shengmu's Piecemeal Sale: The Intellectual Contest Among Pan Gang, Lu Minfang, and Yao Tongshan > The contest among three top Chinese dairy executives has concluded. Pan Gang, Lu Minfang, and Yao Tongshan each demonstrated their distinct styles in the sale of Shengmu. Yesterday, Shengmu announced that Mengniu invested 303 million yuan for a 51% stake in a joint venture, with Shengmu holding the remaining 49%. Notably, Mengniu only acquired Shengmu's downstream production, processing, and sales operations, not its 116,900 dairy cows as of June 30, 2018. The contest among three top Chinese dairy executives has officially concluded. Pan Gang, Lu Minfang, and Yao Tongshan each demonstrated their distinct styles in the sale of Shengmu, showcasing them vividly. Yesterday, Shengmu announced that Mengniu invested 303 million yuan to hold a 51% stake in a joint venture with Shengmu, with Shengmu holding the remaining 49%. Notably, Mengniu's involvement only covers Shengmu's downstream production, processing, and sales operations; Lu Minfang did not touch Shengmu's 116,900 dairy cows (as of June 30, 2018). To prevent Shao Genhuo, Yao Tongshan, and the founding team from "shirking responsibilities" after Mengniu's entry, Shi Wu noted: **In the agreement signed by both parties, Mengniu required Shao Genhuo, Yao Tongshan, Zhang Jiawang, Guo Yunfeng, Wang Zhen, Gao Lingfeng, Wang Fuzhu, and Wu Jianye to firmly maintain a 47.74% stake in Shengmu's listed company, and this commitment was labeled an "irrevocable promise."** Shengmu is another work of Yao Tongshan, one of Mengniu's ten founding veterans, after he left Mengniu. Founded in October 2009, it took only five years for Yao, with his financial background, to bring Shengmu to the Hong Kong Stock Exchange in July 2014. In January 2016, Shao Genhuo, founder of Dabeinong, invested HK$3.355 billion for a 24% stake in Shengmu (currently holding 20.48%). At that time, Shengmu's market value was around HK$14 billion. In October 2016, Yili planned to acquire a 37% stake in Shengmu for 4.6 billion yuan. In this intended transaction, Shengmu's valuation was still above HK$14 billion. However, at the peak of Shengmu's market value, Shao Genhuo and Pan Gang made two completely different decisions: Shao Genhuo fell into the trap, while Pan Gang successfully avoided it. This may be one of the wisest decisions Pan Gang has made since fully taking charge of Yili in 2005. Known for his "steady" style, Pan Gang, despite the unfavorable external environment of being targeted by Sunshine Insurance in 2016, still assessed the situation, conducted thorough due diligence, and cautiously evaluated, daring to say "no" to risky projects at critical moments. Imagine if Pan Gang had taken over Shengmu then; continuing to "cover up the lie" would have consumed too much of Yili's energy. If unfortunately hit by Muddy Waters' short-selling, the consequences for Shengmu would have been disastrous, and this investment could have dragged down Yili's five-strong, 100-billion goal plan. Like a clever fox circling a trap and then walking away, the trap setter and the neighboring brother both waited for prey to fall in, but that moment never came. Shi Wu calculated: **Today, China Shengmu's market value is HK$2.351 billion. Shao Genhuo's investment of HK$3.355 billion has now lost HK$2.874 billion. If Yili had become Shengmu's rescuer at the end of 2016, Yili would have lost HK$3.73 billion.** In fact, after Yili refused the acquisition, Shengmu's performance over the past two years has seen a "Waterloo"-like change. Although Yao Tongshan has a financial background, some things cannot be hidden forever. Now let's talk about Lu Minfang's performance: bold but not reckless. This should be one of the biggest characteristics of this professional manager. **Unlike Pan Gang, who rejected Shengmu entirely out of caution, Lu Minfang dismantled Shengmu, extracting business assets that could complement Mengniu, serving Mengniu's double-100-billion goal.** First, regarding the downstream of Shengmu that Mengniu acquired: although Shengmu's channels are not as extensive as Mengniu's, Shengmu is still an organic milk brand that meets high-end demand. A significant part of Lu Minfang's strategic decisions since taking office has been to build high-end brands to meet the needs of consumption upgrades. According to information Shi Wu has learned: **After the transaction is completed, the Shengmu brand will operate independently. Lu Minfang has already poached an executive from Coca-Cola to focus on Shengmu's market and brand.** In fact, since this year, Shengmu has consciously moved away from "price wars" and stopped crazy buy-one-get-one promotions. Currently, Shengmu's brand product price system has been maintained. After Mengniu takes over Shengmu's liquid milk, how to upgrade the brand and turn Shengmu into another super single product is highly worthy of industry attention. It is worth mentioning that in 2018, Telunsu is expected to exceed 15 billion, and Jindian to exceed 10 billion. If Shengmu is also revitalized, Mengniu will be the king in the high-end white milk segment. Now let's talk about Shengmu's milk source. The reasons Mengniu did not acquire it together may be based on the following considerations: **1. Acquiring Shengmu's milk source would expose Telunsu's organic milk source, making information too transparent, which is not conducive to Telunsu's high-end and mysterious aura; 2. Taking over Shengmu's downstream processing and sales is equivalent to indirectly controlling Shengmu's upstream milk source; 3. Currently, Shengmu's core asset is dairy cows. In the current downturn of raw milk prices, Shengmu has not yet returned to a rational investment value range, and Shao Genhuo, Yao Tongshan, and the founding team have no incentive to exit.** However, according to data Shi Wu has, Mengniu currently collects 14,000 tons of raw milk daily, and Modern Dairy provides 3,000 tons to Mengniu daily. Based on this, Mengniu has a demand for high-quality milk sources, but why did it not acquire Shengmu's entire industry chain this time? Perhaps both sides are waiting for the right time, and only a price acceptable to both can lead to a win-win situation. Now, if they want to fully absorb Shengmu, the founding shareholders are unwilling, and the 116,900 dairy cows won't agree! -END- Good article! Don't forget to click "Like" --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. 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