Fonterra has lodged a formal bid to buy 20% of one China's major infant formula companies for an unspecified amount.
Fonterra yesterday submitted a partial tender offer for Beingmate Baby & Child Food Company Ltd to the Shenzhen Stock Exchange and expects a decision will be announced by March 18.
Beingmate Baby's listing on the Shenzhen exchange shows a market capitalisation of 21.53 billion yuan ($NZ4.8 billion) meaning a 20% stake would be worth 4.3 billion yuan, or $NZ947 million, based on yesterday's opening share price of 16 yuan ($NZ3.54) per share.
Analysts speculated Fonterra's partial tender offer was between $600 million and $700 million.
When initially announcing the partnership last August, Fonterra said the Chinese infant formula market was worth about $NZ18 billion annually, and was expected to climb to $NZ33 billion by 2017.
Craigs Investment partners broker, Peter McIntyre, said the potential tender price was not necessarily one fifth of yesterday's market capitalisation value.
While increasing debt on Fonterra's balance sheet, the partnership would immediately attract earnings, he said.
''They could go it alone, but it makes sense to go in with a [Chinese] partner ... that's seen as a positive,'' Mr McIntyre said.
He said with Nestle the largest company in China's dairy sector, the partnership should be productive, given Beingmate was China's third largest infant formula supplier, with 80,000 distribution points.
''Key for Fonterra will be the size of distribution, and Beingmate's large volumes as a provider,'' he said.
Craigs' research said Beingmate was the third largest Chinese infant formula provider with a 9% share, behind Nestle, with 13%, and Mead Johnson, at 11%.
Fonterra and Beingmate want the global partnership to meet China's increasing demand for infant formula, which would increase the volume and value of Fonterra's ingredients, and branded products exported to China.
Fonterra would use its manufacturing sites in New Zealand, Australia, and Europe to meet demand.
