Danone weans itself from Dumex infant formula brand in China

French dairy giant Danone said Wednesday it had reached a final agreement to sell its Dumex baby-milk business in China, which had been tarnished by bribery claims and a safety scare.

The sale to the Yashili group, a joint venture in which Danone holds a stake, for 150 million euros ($159 million), comes after the French firm earlier this year wrote down the value of Dumex by 398 million euros.

Danone said in a statement that “by bringing the Dumex and Yashili brands closer together, the operation will build a strong local infant milk formula brand platform.”

Dumex China was hard hit by a 2013 food safety scare involving its New Zealand supplier Fonterra.

The scare, which led the company to recall products, damaged the brand despite later being shown to be unfounded.

Claims in 2013 that Dumex employees made payments to doctors and nurses at hospitals to provide Dumex formula to newborn babies further tarnished its reputation in China, its fourth-biggest market.

Danone said earlier this year the write down of Dumex was also due to a shift by Chinese customers away from buying infant formula in supermarkets in favour of purchasing it online.

Danone owns a 25 percent stake in Yashili, with China’s Mengniu Dairy holding just over 51 percent.

It will not hike its stake 9.9 percent in Mengniu, in contrast to what was announced when the sale of Dumex was flagged in July.

The sale still needs the approval of regulators and Yashili shareholders.