S.Korean firm to buy stake in Meihua

CJ Cheiljedang Corp, South Korea's largest food company, is buying a controlling stake in Shanghai-listed Meihua Holdings Group, a monosodium glutamate seller, for an undisclosed amount.

Under the deal, CJ will transfer its biological fermentation assets in China to Meihua. In return, Meng Qingshan, the controlling shareholder of Meihua, and other shareholders will transfer part of their equity stake to CJ. Meihua will also issue an undisclosed amount of new shares to the South Korean firm.

Meihua officials refused to comment on the matter or provide any further details, when contacted.

Meihua is a Hebei province-based food and animal feed additives maker, which went public in 2010. Its shares have been suspended from trading since Dec 17.

By the end of the third quarter in 2015, Meihua's total revenue surged to 8.82 billion yuan ($1.34 billion), a 21 percent increase over the previous year, according to its earnings report.

A CJ spokeswoman said earlier that the South Korean company wanted to boost the market share of its own animal feed and food additive business through the deal, according to a Reuters report.

Currently, the two companies together account for one-third of the global biological fermentation business, according to data from boyar.cn, a Chinese agriculture and animal husbandry industry information portal.

Boyar said if the deal fructifies, the firms will dominate the global biological fermentation market.

CJ's move is in line with the trend followed by many other overseas companies in China. These firms have been acquiring equity stakes in Chinese firms to revamp and expand their business in the country.

In August 2014, US food company H J Heinz Co acquired Chinese soy sauce and fermented bean curd maker Foodstar for $165 million, to expand its reach in the Chinese condiment market and abroad.