Tingyi set to form milk formula JV with Japan’s Wakodo

Tingyi Holding Corp, a Chinese instant noodle maker, is set to form a joint venture with Wakodo, a unit of Japan's beer-maker Asahi, to sell infant milk formula and baby products on the Chinese market, Reuters reported Friday.

Master Kong is Tingyi's most popular instant noodle brand in the Chinese market.

The joint venture of Tingyi (Cayman Islands) and Wakodo Co Ltd, Asahi Group Holdings Ltd's unit that makes baby food, will have registered capital of $5 million and will mainly be marketing and selling baby products.

The venture will not be involved in any manufacturing, Tingyi's CFO Frank Lin told Reuters on Friday.

The venture, in which Tingyi will hold a 45 percent stake and Wakodo the rest, is awaiting approval from relevant authorities, Tingyi said in a statement posted on the Hong Kong Stock Exchange on Friday.

The deal comes at a time when the Chinese government is cracking down on corruption in the infant milk formula sector, a $12.4 billion market expected to double by 2017, and when Japan's Meiji Holdings Co Ltd is pulling out of China due to strong competition.

Foreign firms control around 40 percent of the baby formula market in China.

Among foreign brands, Mead Johnson Nutrition Co holds the biggest share, followed by Nestle and Danone, according to data from Rabobank and Euromonitor.

The sector has been embroiled in corruption scandals this year, with Chinese media repeatedly accusing foreign firms, notably the French food group Danone SA, of paying bribes to medical staff in return for recommending their brands to mothers to feed their newborn babies.

Media reports in September said that Dumex, an infant formula company owned by Danone SA, paid around 500,000 yuan ($82,000) in April to medical staff members in hospitals in seven provinces and municipalities including Beijing, Tianjin and North China's Hebei Province.

Tianjin's government subsequently launched an investigation on the allegations in these reports, finding that 116 doctors and nurses from 85 local medical institutions were found to have been bribed by Dumex since 2011. The Tianjin authorities said the doctors and nurses all received corresponding punishments.