Bright outlook for Israel dairy firm acquisition

The Shanghai-based dairy products maker has been in contact with three of the largest shareholders of Tnuva. If a takeover is successful, the business will be incorporated into its listed arms, Bright Group Chief Financial Officer Cao Xiaofeng was quoted by aastock.com as saying.

Previous reports indicated that Bright Food was in talks with the British private equity fund Apax Partners, which owns a 56 percent stake in Tnuva.

The international strategy of Bright is still in its infancy. The company has been actively seeking acquisitions abroad, Cao said, adding that there are also projects underway in New Zealand and Europe.

As the second-largest food company in China, only after China Oil and Food Import and Export Corp, Bright Food is looking to accomplish a total revenue of 150 billion yuan within the next three years.

The company expects its international sales to account for 25 percent of its revenue by 2015, up from 15 percent now, according to a Reuters report in March.

"Because detailed plans for the purchase project of Tnuva haven't been disclosed yet, it is hard to say whether it will bring related business opportunities for the Chinese market in the future," said Zhao Jun, an analyst from Xiangcai Securities Co Ltd.

Zhao added Bright Dairy still needs to improve its ability in managing purchased companies and launching a more efficient risk control system to deal with overseas projects.

The share price of Bright Dairy surged 3 percent with a closing price of 18.24 yuan on Tuesday.

"Bright Dairy will benefit from the purchase because it will help increase the quality of its dairy products and provide an opportunity to learn advanced management concepts from Tnuva in Israel, which is well known for its advanced technology in agriculture," said Qu Yongxiang, an analyst at Guotai Junan Securities Co Ltd.

Qu added that it would also enhance the global reputation of Bright Dairy in the industry, providing huge profits by expanding its market into the Middle East if the deal price is reasonable.

"The frequent purchases of Bright Dairy indicate that Chinese food giants have sufficient capacity to chase higher-quality and lower-cost dairy sources globally, which is becoming a trend among successful companies," said Qu.