China's Meihua to issue new shares to South Korea's CJ

One of China's top monosodium glutamate companies, Meihua Holdings Group, said it plans to issue new shares to South Korea's largest food company, CJ Cheiljedang Corp.

According to the framework agreement signed earlier this week, South Korea-listed CJ plans to sell part of its biological fermentation assets and other matching assets in China to Meihua in exchange for new shares as it seeks to regroup its operations.

Meihua said the size and price of the deal have yet to be decided. Meng Qingshan, the controlling shareholder of Meihua declined to comment on the matter.

Meihua is based in China's Hebei province, and is a leading Chinese food and animal food additives maker. In 2010, the company went public in Shanghai Stock Exchange. Its shares have been suspended from trading since Dec 17 last year.

By the end of the third quarter in 2015, Meihua saw its total revenues reach 8.82 billion yuan ($1.34 billion), a 21 percent increase over the previous year, according to its earnings report.

A CJ spokeswoman said the South Korean company wanted to boost the market share of its own animal feed and food additive business through the acquisition, Reuters reported.

Currently, the total market share of the biological fermentation business of Meihua and CJ take a controlling one third of the global market, according to data from boyar.cn, a Chinese agriculture and animal husbandry industry information portal.

Boyar said if the acquisition was successful, those leading enterprises will have a further controlling stake in the market, and the biological fermentation industry will usher in a new pattern.

This move is part of the ongoing trend by overseas companies acquiring Chinese equities to recombine and expand their business in China.

In Aug 2014, US food company H.J. Heinz Co acquired Chinese soy sauce and fermented bean curd maker Foodstar for $165 million.