Swiss-based food and beverage behemoth Nestlé has been criticised for its “remarkably low offer” for high-quality dairy firm Diequan Milk Co, and local government officials in China have been criticised for pressuring company officials to accept the takeover bid.
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Nestlé had offered 40m yuan (US$4.8m) for an 80% stake in Diequan, while market watchers value the company’s brand value at an estimated 200m yuan.
It has been suggested by industry insiders that Nestlé‘s offer for Yunnan-based Diequan Milk is so low as to violate market rules, but authorities in Eryuan County, Southwest China’s Yunnan province, have reportedly requested that Diequan’s chairman sign the letter of intent for the takeover despite the fact that the company’s management had already rejected Nestlé’s offer.
According to a report in Business Weekly, the local government is anxious to attract multinational companies such as Nestlé, but “was wrong to accept the low price and harsh conditions proposed by Nestlé without realising Diequan’s real value”. Among these conditions was the clause that if Nestlé acquired Diequan, it would have exclusive purchasing rights to local producers’ milk.
“Nestlé, and other dominant market players,” said the report: “must abide by justified market rules, despite the temptation to violate such rules as China transforms itself into a sound market economy.”
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