CJ Cheiljedang, the country’s largest food company, is seeking to buy a controlling stake in China’s MeiHua Holdings Group to cement its global leadership in the animal feed and food additive market.
MeiHua — China’s top seller of monosodium glutamate, producing food and animal feed additives made from biological fermentation — recorded sales of 1.8 trillion won ($1.5 billion) in 2014.
“The company has signed a memorandum of understanding with MeiHua to negotiate an acquisition deal,’’ the flagship affiliate of CJ Group said in a filing to the financial authorities Thursday, declining to comment the details, including the price under discussion.
CJ Cheiljedang has sought the deal for the past three years in its effort to expand its bio business in the global market. Its bio business is composed of animal feed and food additives. The Korean food company is the global top producer of lysine for animal feed.
Stock market watchers responded to CJ’s deal plan positively, saying the takeover of MeiHua will cement CJ’s global leadership in the lysine market.
“The expansion of the bio business is expected to fuel growth of CJ Cheiljedang as well,’’ Cho Yong-sun, a stock market analyst from HMC Investment and Securities
The company has capitalized on the bio business as a new growth engine, which takes about 30 percent of the entire revenue, as its main food business focusing on the local market faces market saturation.
CJ Group is among the many domestic conglomerates who are seeking new income sources in the bio sector. Sohn Kyung-sik, who leads the group’s management body, said in his New Year’s message on Jan 4 that the group would step up its global expansion through M&As in bio and logistics sectors.
The growth of the Korean food and entertainment giant has been stagnant for the past three years after its chairman Lee Jay-hyun was put behind bars on charges of embezzlement and tax evasion in 2013.
According to the analysts, its consolidated sales are estimated at 29.1 trillion won ($24.5 billion) in 2015.