On July 21, 2026, Hong Kong-listed dairy farming giant AustAsia Group (02425.HK) announced that its wholly-owned subsidiary, Shanghai Ao Ya Food Co., Ltd., plans to acquire the in-China dairy product (drinking milk and yogurt) and B2B business of Meiji (China) Investment Co., Ltd. for a base purchase price of 320 million yuan (capped at 350 million yuan). The transaction adopts a “restructure first, acquire later” model: Meiji China will first consolidate the assets, personnel, and contracts of its two dairy production companies in Suzhou and Tianjin into a newly established target company, which AustAsia Group will then acquire in full. The deal is expected to close by December 31, 2026.
On the announcement day, AustAsia Group's share price surged 13.25% to close at HKD 1.88 per share. The market cast a preliminary vote of confidence in this “reverse takeover” with real money.
Meiji’s Retreat: Over 2.1 Billion Yuan in Losses Over Three Years, Premium Strategy Fails
Meiji's sale of its Chinese dairy business essentially represents a strategic retreat by the Japanese century-old food giant from the Chinese market. According to the announcement, from 2023 to 2025, the net sales of the target business were 392 million yuan, 403 million yuan, and 422 million yuan respectively, but operating profits were losses of 491 million yuan, 144 million yuan, and 155 million yuan, accumulating nearly 800 million yuan in losses over three years. Overall, Meiji China’s net sales in 2025 were 1.284 billion yuan, with an operating loss of 1.04 billion yuan, a significant widening from 643 million yuan in 2023 and 487 million yuan in 2024. From 2023 to 2025, Meiji China’s cumulative operating losses exceeded 2.1 billion yuan.
Breaking it down by factory, Meiji Tianjin recorded net sales of 62 million yuan, 75 million yuan, and 131 million yuan from 2023 to 2025, with operating losses of 91 million yuan, 287 million yuan, and 50 million yuan respectively. Meiji Suzhou’s net sales over the same period were 389 million yuan, 346 million yuan, and 259 million yuan, with operating profit shifting from profits of 27 million yuan and 22 million yuan to a loss of 100 million yuan in 2025.
In the announcement, Meiji acknowledged the dramatic changes in China's dairy market environment, facing multiple challenges including diversified consumer demand, channel upheaval, intensified competition, and persistently high raw material and logistics costs. As a typical Japanese brand, Meiji was relatively cautious in market spending, which negatively impacted product sales. For example, a 950ml bottle of “Meiji Junichi” milk retails at 19.9 yuan, while Hema's own-brand high-calcium fresh milk of the same size sells for just 10.89 yuan on the same shelf, a price gap of nearly double.
Meiji Group clearly stated that this transaction is part of a “selection and concentration” portfolio restructuring, with future resources to be allocated to core areas like chocolate. Intellectual property and certain brands related to yogurt products (including lactic acid bacteria) are not included in this transfer; the trademark usage period is generally two years. Meiji Food (Guangzhou) Co., Ltd. will continue to operate as a production base for the chocolate business.
AustAsia’s Calculation: From Selling Milk to Making Milk, Expanding Downstream
In stark contrast to Meiji’s retreat, AustAsia Group is on the offensive. AustAsia Group is a leading domestic dairy farming enterprise, operating 11 modern dairy farms in Shandong and Inner Mongolia by the end of 2025. Its main customers include Mengniu, Bright Dairy, Junlebao, New Hope Dairy, Genki Forest, and Jane’s. For the full year of 2025, AustAsia Group achieved revenue of 3.468 billion yuan, down 5.9% year-on-year, and a net loss of 751 million yuan. Although the loss narrowed by 40.9% year-on-year, it marked the third consecutive year of losses, with cumulative net losses from 2023 to 2025 reaching 2.509 billion yuan. Raw milk revenue was 2.678 billion yuan, and beef cattle revenue was 431 million yuan.
However, a turnaround emerged in 2026. On July 13, AustAsia Group issued a positive profit alert, expecting a net profit attributable to owners of the parent company of approximately 90 million yuan to 130 million yuan for the first half of the year, reversing a loss of 378 million yuan in the same period last year. The turnaround was primarily attributed to improved farming operational efficiency, a rise in the average selling price of beef cattle, and a reduction in losses from changes in the fair value of biological assets.
It is precisely at this point of just returning to profitability that AustAsia chose to acquire a persistently loss-making dairy enterprise. The strategic logic is clear: extending from upstream raw milk production to downstream dairy processing and sales. In the announcement, AustAsia Group stated that the acquisition will allow it to “expand its business scope from raw milk to downstream industries,” with a larger proportion of self-produced raw milk processed through Meiji’s manufacturing facilities. This is expected to improve the visibility of raw milk production demand, reduce reliance on third-party customers, and mitigate risks from raw milk price fluctuations and cyclical market swings.
Meiji’s factories in Tianjin and Suzhou are established dairy production bases with existing capacity, equipment, and technical expertise. These processing capacities are currently relatively underutilized. AustAsia plans to introduce its existing business volume after the transaction to increase capacity utilization, thereby diluting fixed costs and enhancing production efficiency.
This strategic path has a successful precedent. At the end of 2016, New Hope Dairy acquired Asahi Group's related business and built “Asahi Weipin” into a billion-yuan-level benchmark product. AustAsia clearly hopes to replicate this model – using Meiji's brand assets and manufacturing capabilities to find a stable processing outlet for its surplus raw milk capacity.
Meiji: Both Seller and Shareholder
The uniqueness of this transaction lies in the fact that the buyer and seller are not complete strangers. Meiji China holds approximately 15.85% of AustAsia Group's shares, making it a major shareholder. Therefore, this acquisition constitutes a connected transaction, requiring approval from independent shareholders. With Meiji acting as both the seller and a major shareholder of the buyer, this “left-hand-to-right-hand” structure makes the fairness of the transaction a key focus for independent shareholders.
From a valuation perspective, based on the maximum purchase price of 350 million yuan, the target group corresponds to an unaudited pro-forma net asset value of approximately 548 million yuan at the end of 2025, implying a price-to-book (P/B) ratio of about 0.64 times. This represents a discount of roughly 51.1% compared to the median P/B ratio of 1.31 times for five comparable A-share dairy companies. This discount directly reflects the target assets' loss-making status and the market's pessimistic view of their profit prospects.
Can a Loss-Turnaround Buyer Revive Another Loss-Making Asset?
The biggest question mark surrounding this deal lies in the integration outcome. AustAsia Group has just turned profitable, and the historical baggage from a net loss of 751 million yuan in 2025 and 1.269 billion yuan in 2024 has not been fully shed. Meanwhile, the target business being acquired continues to incur losses – with an operating loss of 155 million yuan in 2025. Whether combining two “loss-making genes” can produce a “negative times negative equals positive” effect carries significant uncertainty.
Simultaneously, China's overall dairy market remains in a downward cycle. NielsenIQ data shows that total dairy channel sales in May 2026 fell 9.7% year-on-year. In 2025, Mengniu's revenue declined 7.3% year-on-year, while Yili's revenue only grew 0.13%. Even if AustAsia successfully integrates Meiji's manufacturing facilities and brand assets, achieving profitability in a generally sluggish market environment will be a tough battle. The trademark usage period is generally only two years, meaning AustAsia must complete the brand transition and build its own channels within a limited timeframe.
Conclusion
Meiji has sold its dairy business cultivated in the Chinese market for years but retains core businesses like chocolate and brand licensing oversight. AustAsia has purchased a persistently loss-making processing system but gained a strategic channel to transition from “selling milk” to “making milk.” This 320 million yuan transaction is essentially a mutually beneficial asset restructuring: Meiji sheds a burden to focus on core operations; AustAsia fills a gap to access the downstream. However, completing the transaction is just the starting point. Whether AustAsia Group can transform Meiji's manufacturing capabilities and brand assets into sustainable profit growth, much like New Hope Dairy revitalized Asahi Weipin, remains to be tested by time and the market. Against the backdrop of overall pressure in the dairy industry, whether this “reverse takeover” is a savvy bottom-fishing move or a high-difficulty “bailout” may only become clear in the 2027 financial reports.
Comments