Chinese pharmaceutical company Yangshengtang Co. is looking to invest in Chinese manufacturer and bottled-water producer, Nongfu Spring.
Yangshengtang Co. was founded by Chinese entrepreneur Zhong Shanshan, who also founded Nongfu Spring and is chairman of its board.
Shanshan, already majority owner of Nongfu Spring, is looking to buy HK$2bn ($256m) back in shares in the next six months.
At the current market price (9 July) of HK$33.75 per share, Yangshengtang Co. currently owns HK$253.63bn ($32.46bn) in value of Nongfu Spring.
In total, Shanshan owns 83.98% of the shares of Hong Kong-listed Nongfu Spring.
In a statement to shareholders, Nongfu Spring said: “Based on its recognition of the value of the company and its confidence in the overall business development and growth potential of the company, Yangshengtang intends to purchase additional H Shares of the company with its internal funds on the open market to increase its shareholding in the company.”
Established in 1996, Nongfu Spring is one of the largest packaged-water producers in China. In its annual results for the year ending 31 December 2022, the company posted revenue of 33.2bn ($4.84bn) yuan and profit of 8.4bn yuan.
In its full-year results for the year ended 31 December, the company posted revenue of 42.6bn yuan and a profit of 12bn yuan.
Nongfu Spring's portfolio includes a range of packaged water, teas, juices and functional-beverage brands. Packaged water accounted for 47.5% of revenue in 2023, down from 54.9% in 2022. Tea-based products grew to 29.7% from the previous year’s share of 20.8%. Functional beverages remained flat at 11.5%.
In January, Nongfu Spring set out plans to invest 5bn yuan ($704m) in a domestic bottled-water plant in Jiande City, East China.
The site will process and bottle water, as well as other beverages and “related products”. The company has reached a development agreement with Jiande City and identified 66 hectares of potential land in the city’s Chengnan New District for the facilities. As part of its land use agreement with Nongfu Spring, the local government has agreed to build access to “six infrastructures”.
The total market value of packaged water in China is forecast for growth in the next four years to $40.6bn, according to GlobalData's Intelligence Centre.
