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Investor CentralChina Dairy Group Ltd - MANAGEMENT REPLY: Why is it selling Kuitun Dairy at a significant loss?
27/9/2013 – China Dairy Group Ltd has agreed to sell its subsidiary Silver Bridge International Holdings Kuitun Dairy Company Ltd (Kuitun Dairy) for RMB 6 mln.
China Dairy Group owns a 60% stake in Kuitun Dairy via its wholly owned subsidiary, Silver Bridge International Holdings Pte Ltd.
It is selling Kuitun Dairy to Xinjiang Production and Construction Group Dairy Company Ltd (Xinjiang Group).
The consideration is split into two tranches.
The first tranche of RMB 3 mln has already been paid to China Dairy Group.
The remaining RMB 3 mln will be paid in the second tranche before the end of 2014.
Over and above the sale consideration, Xinjiang Group will pay another RMB 2 mln to China Dairy Group if it succeeds in obtaining an infant milk powder production licence.
China Dairy Group has agreed to help Xinjiang Group apply for the license.
Following the payment of the first tranche, Kuitun Dairy has ceased to be a subsidiary of China Dairy Group.
Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.
1. Who are the shareholders of Xinjiang Production and Construction Group Dairy Company Ltd?
China Dairy Group's announcement didn't highlight the shareholders of Xinjiang Production and Construction Group Dairy Company Ltd which is buying the Kuitun Dairy from China Dairy Group.
To the ordinary observer, the name suggests that the buyer is a production and construction group.
That makes it a bit awkward to understand why it would be interested in the dairy business.
2. Is this deal an 'interested person transaction'?
China Dairy Group's announcement didn't declare whether the deal constitutes an 'interested party transaction' or not.
The absence of such a declaration makes us wonder if the shareholders of Xinjiang Production and Construction Group Dairy Company Ltd are related to the shareholders/directors/management of China Dairy Group.
Please can China Diary Group confirm whether or not this is an 'interested party transaction'.
3. What took it so long to announce the deal?
China Dairy Group said it agreed to sell Kuitun Dairy on September 12 but the announcement on SGX followed almost a week later, on September 17.
4. Why is it selling Kuitun Dairy at a significant loss?
(Total:11 questions)
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