Chinese thirst for milk leads to $960m sale of Israeli dairy company

Israel Milk Cow

The Chinese state-owned food conglomerate, Bright Food, bought controlling shares (56%) of Tnuva, the iconic Israeli dairy producer from Apax equities in a deal estimated at $960 million.

The deal values the entire company at around $2.5 billion. Mivtach Shamir, the second major shareholder (21%) in Tnuva, has not yet finalized a deal with Bright Food, but is said to be in negotiations.

Tnuva was founded in the 1920s as a cooperative of various kibbutzim, farms and other agricultural communities. In the years the followed, it built itself up as a leading supplier and producer of milk, cheese, eggs and meat. Apax and Mivtach Shamir bought shares in the company in 2008, when the entire company was valued at $1 billion, with a minority of shares still being held by the veteran kibbutzim. Tnuva had annual revenues of $2.05 billion in 2013.

The deal was praised by Minister of Economy Naftali Bennett, who was partially involved in the negotiations, and who said that “Israel should welcome China with open arms.” Other members of government criticized the deal for placing too large a share of Israel’s food security in the hands of foreign investors, although Tnuva was already owned by the British-based Apax private equity house. MK Shelly Yachimovich called for the company to be publicly traded on the Tel Aviv stock exchange instead, a plan considered by Apax in the past but almost certain to be cancelled with the sale to Bright Food.

Chinese food companies have been making a series of overseas acquisitions recently (Bright Food itself bought a controlling stake in the British cereal maker Weetabix in 2012, and in the Australian dairy company Mundella Foods earlier this year), especially to meet ever-growing demand for milk and cheese in China. The Chinese cheese market has quadrupled in value since 2008, and is expected to double again by 2015. Bright Foods is the fourth-largest dairy producer in China, and as well as raw materials, the acquisition of Tnuva will give it access to cutting-edge dairy processing technology.