Diary giant Fonterra Co-operative Ltd, the world's largest exporter of dairy products, said it has been granted Chinese regulatory approval to set up a joint venture with Chinese diary company San Lu Group.
Approval for the venture, in which Fonterra will pay US$107 million ($179 million) for a 43 percent stake in the Chinese company, was announced during a visit to New Zealand by Chinese Premier Wen Jiabao. The deal was first announced last December.
"Developing a closer working relationship with San Lu is the next logical step for Fonterra's business in China," Fonterra chief executive Andrew Ferrier said in a statement.
San Lu is China's top milk powder producer. Once state-owned but now partly held by private investors and employees, it also holds 5 per cent of the nation's fresh milk market, and 9 per cent of its yoghurt market.
The Chinese dairy market remains dominated by local firms such as Mengniu Dairy but it has been attracting a slew of foreign giants.
"Dairy consumption has increased considerably in recent years, but it is still well below the average for the Asian region," added Ferrier.
Annual per capita milk consumption in China is just 2.7 per cent of the US level and 6.4 per cent of Japan's according to the website of the China Dairy Information Centre.
Unlisted Fonterra, New Zealand's biggest company, is owned by nearly 12,000 farmer shareholders, with an annual turnover of $12.3 billion.
It exports about 95 per cent of its two million tonnes of annual production, which generates about 20 per cent of New Zealand's exports and 7 per cent of gross domestic product.
