According to an announcement by Uni-President Enterprises on December 13, it plans to sell all of its 9% stake in Heilongjiang Wondersun Dairy Co., Ltd., held by its three subsidiaries (Kunshan Uni-President, Chengdu Uni-President, and Wuhan Uni-President), for a total of RMB 334 million.

Specifically, Kunshan Uni-President will sell 27,521,860 shares to Beidahuang Investment Holdings Co., Ltd. and 4,026,143 shares to China Agricultural Reclamation Industry Development Fund, with transaction amounts of RMB 137.5 million and RMB 20.1166 million, respectively. Both Chengdu Uni-President and Wuhan Uni-President will sell 17,645,400 shares each to China Agricultural Reclamation Industry Development Fund, with a combined transaction amount of approximately RMB 176 million.

As 2020 approaches, food giant Uni-President and well-known dairy company Wondersun are tightly holding onto the tail of 2019, ending their 14-year 'marriage.'

-01- 'Mutual Consent'

Tracing back to July 2005, Wondersun Dairy, a wholly-owned subsidiary of Beidahuang Group, selected 'capable' and 'experienced' investor Taiwan's Uni-President Group from among many potential partners.

Uni-President China Investment Company, a subsidiary of Taiwan's Uni-President Group, subscribed to 15% of Wondersun Dairy's equity through its three subsidiaries (Kunshan, Wuhan, and Chengdu), with a total subscription amount of RMB 300 million.

According to media reports at the time, Uni-President expressed hopes to expand cooperation with Beidahuang Group, combining Beidahuang's abundant raw material resources with Uni-President's brand marketing and management experience to jointly develop the mainland food market. At the time, this transaction was also seen as a signal of Uni-President's move to enter the mainland dairy market.

During this period, many domestic and foreign dairy companies also saw the advantages of Wondersun's milk sources and proposed cooperation, but Beidahuang Group's ideal partner was: an investor who could bring comprehensive resources and sustained competitiveness to Wondersun in marketing and new product development, with capital not being a precondition.

According to public data, at that time Wondersun's milk powder production was second only to Sanlu, ranking second nationally, and it had certain liquid milk production capacity. In 2004, Wondersun's sales revenue was RMB 1.35 billion, with net profit of RMB 12.62 million. In the comprehensive dairy ranking, Wondersun ranked fourth nationally, behind Yili, Mengniu, and Guangming.

At that time, in 2005, Mengniu's 'Super Girl' yogurt was extremely popular nationwide, making Mengniu's brand and reputation known across the country. Facing this situation, Wondersun, with its rich dairy resources, how could it be content to stay in the northeast corner?

Of course, Uni-President's calculations were also shrewd. Taking a stake in Wondersun was not so much the beginning of its involvement in the mainland dairy industry as a prelude to Uni-President's expansion into the entire 'Beidahuang' region.

At the time, Hong Shih-min, then manager of Uni-President Group's Public Affairs Office, said, 'In the future, on one hand, Uni-President can obtain a more stable source of milk powder through its stake in Wondersun, given the rising trend in milk powder prices, serving as a backing for downstream beverages and dairy products such as milk tea, coffee, and yogurt drinks; on the other hand, with the rising health consciousness in Chinese society, Uni-President is optimistic about the development potential of nutritional supplements in the Greater China region and is actively positioning itself in this field.'

-02- Same Aspirations, Different Paths

Naturally, with mutual consent, the 'marriage' with Uni-President occurred as described above, seemingly natural. However, what defeats you is sometimes just the times, manifested through your competitors.

A review of Uni-President's 2015 financial report reveals that by the end of 2015, Uni-President's stake in Wondersun Dairy had decreased to 9%; and according to Uni-President's asset valuation standards, its available-for-sale financial assets were recorded at fair value of RMB 212 million in 2015. Therefore, the asset appraisal company commissioned by Uni-President valued Wondersun Dairy at RMB 2.352 billion for 2015.

Looking back at this point:

In 2005, Mengniu first exceeded RMB 10 billion, in 2007 exceeded RMB 20 billion, in 2010 exceeded RMB 30 billion, in 2013 exceeded RMB 40 billion, and in 2014 entered the RMB 50 billion club; Yili exceeded RMB 10 billion in 2005, RMB 20 billion in 2008, RMB 30 billion in 2011, RMB 40 billion in 2012, RMB 50 billion in 2014, and RMB 60 billion in 2015; Guangming Dairy had RMB 6.9 billion in 2005, exceeded RMB 10 billion in 2011, and exceeded RMB 20 billion in 2014.

According to the appraisal results from the asset appraisal company commissioned by Uni-President, the 2015 valuation was less than RMB 2.4 billion, far below the scale of Yili and Mengniu.

In fact, some media have analyzed that 'initially, both sides came together with dreams, but during the subsequent cooperation, they discovered many unexpected incompatibilities. Uni-President initially wanted to send a management team to Wondersun to participate in operations, but later simply let it go.'

So, looking back at 2019, the breakup between Uni-President and Wondersun seems inevitable; 'a couple with nothing in common might as well not stay together.'

-03- Both Let Go, Each Goes Their Own Way

When a marriage ends, both parties are responsible. Even though Wondersun has been criticized by industry insiders as 'playing a good hand badly' and 'getting up early but arriving late,' it is true that Uni-President also let go.

When asked why Uni-President cleared its stake in Wondersun, the response was rather official. Taiwan's China Times Electronic News quoted Uni-President as saying that Heilongjiang Wondersun Dairy 'has annual revenue exceeding RMB 4 billion,' and its main controlling shareholder is Beidahuang Agricultural Reclamation Group Corporation, which is under the Ministry of Finance.

'Since December 16, 2018, the former 'Heilongjiang Agricultural Reclamation Group' was restructured to be under the Ministry of Finance, assuming the role of an agricultural integration platform. Uni-President considered that at this stage, its own experience and resources in agricultural integration could not play a role, so under the recommendation of 'Beidahuang Agricultural Reclamation Group Corporation,' it decided to sell the 9% stake to China Agricultural Reclamation Industry Development Fund and Beidahuang Investment Holdings Co., Ltd.'

The report cited Uni-President's statement as an explanation for the peaceful 'breakup.'

But the fact is that in recent years, Uni-President has gradually sold off its stakes in several joint ventures operating in mainland China, hoping to focus more energy on its 'biological child' operating in the mainland, Uni-President China Holdings Co., Ltd.

Before the 'breakup' with Wondersun, Uni-President had already exited several joint ventures. In 2016, Uni-President successively sold 100% of the equity of Foshan Sanshui Jianlibao Trading Co., Ltd., and a total of 47.83% of the equity of Jinmailang Beverage Co., Ltd. held through its subsidiaries, with a total transaction amount exceeding RMB 2.2 billion.

In 2017, Uni-President sold its Starbucks business in the mainland market, the highest transaction amount, selling the remaining 50% stake in the Starbucks East China market joint venture (Shanghai Uni-President Starbucks Coffee Co., Ltd.) to Starbucks for approximately USD 1.3 billion (about RMB 8.759 billion), completely exiting Starbucks in the mainland.

Luo Zhixian previously stated that he had 'calmed down on M&A in the mainland market' because 'M&A involves two companies from different backgrounds and cultures, requiring integration.'

With this layout for its 'biological child,' Uni-President China's revenue in the first half of this year was RMB 11.4695 billion, up 2.2%; among which, the instant noodle business grew 2.8% year-on-year, and the beverage business grew 0.6%.

With both Uni-President and Wondersun letting go, Uni-President has clearly begun to focus on Uni-President China. Of course, Wondersun, as a true veteran among dairy companies, has not 'wasted time.'

On its official website, it can be seen that the company currently has total assets of RMB 3.68 billion, manages 20 branches and subsidiaries, has an annual fresh milk processing capacity of over 1 million tons, and its products include infant formula, liquid milk, colostrum products, adult milk powder, soy milk powder, and infant rice cereal, with a sales network covering the whole country.

This year, the company's brand value was RMB 36.618 billion, and it was selected for the 2019 China's 500 Most Valuable Brands. However, its occasional IPO rumors are hard to verify...

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