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Johnson & Johnson (NYSE: JNJ) plans to spend ¥650 million taking over Elsker, a leading infant product distributor based in Shanghai, people familiar the matter said, adding that the talks had dragged on for months but the deal still had not been finalized.
Elsker was founded in 2006 as a rival to Johnson & Johnson. It is said that its revenue added up to between ¥200 million and ¥300 million in 2011, and a previous ¥500 million takeover offer had been rejected.
Johnson & Johnson declined to comment on the matter, and Elsker could not be reached for interview.
In 2008 Johnson & Johnson paid ¥2.3 billion for the acquisition of Dabao, a downmarket cream maker based in Beijing. Dabao's then annual net profit was ¥50 million.
Acquiring Chinese brands is a common practice by foreign healthcare and makeup retailers seeking to gain market share in the country. What they covet is their Chinese rivals' distribution channels rather than the brand itself, and this is also the fastest way to kill an opponent, experts say.
Johnson & Johnson purchased Dabao for its prevalence in second and third tier cities. L'Oreal purchased a local Chinese brand in 2003 and has since become the second largest player in China's beauty market, moving up from the 11th place spot it occupied a decade ago.
$1 = ¥6.34
@2011 China Economy @ The China Perspective.
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