Beijing Sanyuan Group, the parent company of Sanyuan Food, is transforming itself into an agricultural group by acquiring two Beijing poultry product enterprises.

That represents a move by Sanyuan, which was unscathed from a melamine scandal last year, to diversify its business and strengthen its competitiveness.

Corporate executives said there was a possibility that the quality assets of the two poultry businesses would be "injected into Sanyuan Food", the only listed company under Beijing Sanyuan Group, "at an appropriate time".

Under the agreement signed among the three sides, Beijing Sanyuan Group will obtain the assets of Beijing Huadu Foodstuff, a leading chicken chain in the capital, for free, and the business of Beijing Dafa Group, a top 50 leading chicken chain nationwide for management.

The new entity, which is being renamed as Beijing Capital Agricultural Group, will own assets worth 15 billion yuan, and generate annual sales revenue of 10 billion yuan. It covers a whole package of businesses ranging from breeding and processing of poultry to dairy food processing, bio-pharmaceuticals and logistics.

"We plan to build it into the leading agricultural group in China. We are working on the detailed strategies," said Xue Gang, general manager, Beijing Capital Agricultural Group.

Zhang Fuping, chairman of the group, told China Daily that the "restructuring project is expected to be completed soon".

The corporate restructuring will eliminate the competition between Huadu and Dafa, and transform the new group into a powerful livestock chain, said YinYanxun, chairman, Beijing Dafa Group.

When the integration of the two businesses is complete, the new company will produce half of the chicken products in Beijing, about 200,000 tons annually, and export 30,000 tons of prepared food every year.

In the long run, the new entity will also "help assist Sanyuan Food grow stronger, enhance its capability in research and development and expand its assets", said Zhang, also chairman of Beijing Sanyuan Group.

Sanyuan Food is one of the few dairy firms that emerged unscathed in the contaminated milk scandal of last year. Top firms like Mengniu and Yili ran up huge losses for 2008, while Sanyuan's profits surged 87.2 percent year-on-year to 40.75 million yuan.

The company also became a national brand after it bagged the core assets of troubled milk producer Sanlu for 616.5 million yuan in early March.

Compared with its archrivals, Sanyuan is still smaller in size, having posted a first quarter profit of just 32.32 million yuan, compared with Yili's 113 million yuan in the same period.

"We are not powerful enough to be the leading player, but we expect to be a quality national dairy brand," said Zhang.

(China Daily May 19, 2009)