Feb. 2 (NBD) -- Fast expansion of cross-border e-commerce entices Chinese companies to eye overseas health products makers. Shenzhen-listed By-Health announced on Wednesday its plan to acquire a 100 percent stake of Melbourne-based probiotics maker Life-Space Group Pty Ltd (Life-Space) for a consideration up to 690 million Australian dollars (558.0 million U.S. dollars).

This is not the first move that By-Health made in overseas markets. As early as 2016, it joined hands with famous American dietary supplement manufacturer and seller NBTY Inc. to set up a joint venture and obtained the permanent right to run and use the brands of Nature's Bounty and MET-Rx.

By-Health CEO Lin Zhicheng said to NBD that the acquisition was an important part of the company's deployment in global market segments and would help to explore new growth engines for the company.

Photo/DongFang IC 

Deal explores new opportunities for advancement

According to the announcement, upon completion of the transaction, Life-Space will become By-Health's wholly-owned subsidiary. By-Health has hired agents to conduct due diligence regarding the acquisition target. The deal still needs the approvals from the board of directors and stockholders.

The announcement also introduced that Life-Space, founded in 1993, was one of the leading probiotics makers in Australia and entered the Chinese market in 2014 through cross-border e-commerce platforms.

To complete the transaction, By-Health has set up a subsidiary Australia By Saint Pty Ltd in Australia, and the money for the acquisition encompasses the company's own disposable funds and bank loans.

Data from the market research provider Euromonitor shows that the global probiotics product market has a size of approximately 36 billion U.S. dollars, to which the Chinese market contributes about 45.5 billion yuan (7.2 billion U.S. dollars).

By-Health believed that with strengthening health awareness of global customers, maturing market and continuously upgrading consumption demand, the dietary supplement market is increasingly segmented and tailored to catering to individual needs. Against such background, the deal would fully integrate the resources and advantages Life-Space holds in the niche market of probiotics, help to achieve synergistic effect at the level of products and businesses between these two sides and discover new opportunities for growth. 

Overseas assets require effective integration

As China's domestic market of consumer goods faces adjustment and the robust cross-border e-commerce fosters a beneficial environment for overseas healthcare products, Chinese enterprises are competing to seek for merger and acquisition targets abroad.

Australian healthcare brands became the first choice for many companies.

For instance, Health & Happiness Group (H&H) acquired Swisse Wellness Group Pty Ltd (Swisse) for a total of 1.697 billion Australian dollars (1.4 billion U.S. dollars) in two separate deals in 2015 and 2017, respectively, which created much of a stir in the industry.

With regard to the acquisition of Swisse, H&H once explained that the year of 2015 embraced "consumption upgrade" and imported healthcare products gradually altered the domestic market of traditional nutrition.

According to Euromonitor, China's consumer market of healthcare products amounted to 218.8 billion yuan (34.8 billion U.S. dollars), only second to the U.S.

Euromonitor also predicted that such market in China will touch 325.8 billion yuan (51.8 billion U.S. dollars) in 2021 with an annual compounded growth rate of 8.29 percent.

It's noted that in 2017, Nature's Bounty rapidly gained a stronger foothold in Chinese market by leveraging By-Health's marketing channels.

A dealer of healthcare products who wants to remain anonymous noted that Nature's Bounty still lagged behind Swisse in terms of brand influence and had a long way to go in pushing up its sales. Although imported healthcare products do have some edges in brand impact, yet to transfer brand awareness into actual sales needs more input in marketing channels and cultivating brand loyalty in consumers' minds, the dealer added.

Email: gaohan@nbd.com