HONG KONG China's largest instant noodle maker Tingyi Holding Corp (0322.HK) plans to form a joint venture with Wakodo, a unit of Japan's beer maker Asahi, to sell infant milk formula and baby products on the Chinese market.
The deal comes at a time when the Chinese government is cracking down on corruption in the infant milk formula sector, a $12.4 billion market expected to double by 2017, and when Japan's Meiji Holdings Co Ltd (2269.T) is pulling out of China due to strong competition.
The joint venture of Tingyi (Cayman Islands) and Wakodo Co Ltd, Asahi Group Holdings Ltd's unit that makes baby food, will have registered capital of $5 million and will mainly be marketing and selling baby products.
The venture will not be involved in any manufacturing, Tingyi's CFO Frank Lin told Reuters on Friday.
The venture, in which Tingyi will hold a 45 percent stake and Wakodo the rest, is awaiting approval from relevant authorities, Tingyi said in a statement on the Hong Kong stock exchange.
Foreign firms control around 40 percent of the baby formula market in China. Among foreign brands, Mead Johnson Nutrition Co MJN.N holds the biggest share, followed by Nestle NESN.VX and Danone, according to data from Rabobank and Euromonitor.
The sector has been embroiled in corruption scandals this year, with Chinese media repeatedly accusing foreign firms, notably France's Danone SA (DANO.PA), of paying bribes to medical staff in return for recommending their brands.
(Reporting by Twinnie Siu and Donny Kwok; Writing by Lee Chyen Yee; editing by David Evans)
WORLD NEWS SCHEDULE AT 1800 GMT/2 PM ET
Iraqi forces free hundreds of civilians in Mosul Old City battles as death toll mounts