FRANCE’S Danone, battling local rivals for a larger share of China’s booming baby milk market, has invested US$550 million in formula maker Yashili International Holdings, further reducing its dependence on slow growth Europe.

    The deal strengthens Danone’s ties with China Mengniu Dairy Co., China’s top dairy firm and Yashili’s largest investor, and comes as the French firm’s key Dumex baby nutrition brand seeks to win back consumers after accusations of high prices, bribery and tainted milk scares last year.

    The 25 percent stake purchase is also the first major investment since Danone split its chairman’s dual roles in September, handing the CEO job to Emmanuel Faber.

    Kepler Cheuvreux analyst Jon Cox said the deal “made sense” and limited the chances of a large value-destroying deal in the short term.

    “[It] reduces the chance of big-bang mergers and acquisitions, say involving [U.S. firm] Mead Johnson, which the market was concerned about.”

    Sources familiar with the matter said earlier this month that Danone wanted to pursue a takeover of U.S. formula maker Mead Johnson Nutrition Group.

    Analysts have also speculated Danone might sell its Medical Nutrition business and push deeper into markets like China and Africa with acquisitions. China is Danone’s fourth-largest market, accounting for around 7 percent of its group sales.

    But global dairy firms such as Danone, traditionally dominant in the lucrative premium end of the milk powder sector, are having to fend off increasingly savvy local brands. China is also pushing consolidation to strengthen domestic players. (SD-Agencies)