UK-based food processing and retailing company Associated British Foods (ABF) and Wilmar International subsidiary Yihai Kerry Arawana Holdings have executed a binding term sheet in order to form a 50/50 joint venture (JV) in China.

The JV will focus on manufacturing, sale and distribution of yeast and bakery ingredients, acquire China’s yeast and bakery ingredients activities of AB Mauri, and utilise Arawana’s supply chain, extensive sales and distribution network and local market expertise in the country.

AB Mauri CEO Cathal Duffy said: “This joint venture is a great opportunity to build on the foundation of our yeast and bakery ingredients business in China.

“The joint venture will leverage AB Mauri’s baking know-how and technology with Yihai Kerry Arawana’s extensive route to market, local management expertise and its complementary portfolio of products.

“We are looking forward to working with Yihai Kerry Arawana on the shared vision of building a successful bakery business together.”

The completion of the deal is subject to regulatory approvals and the new JV will be headquartered in Shanghai, China.

Additionally, the new JV will also build and operate a new yeast plant co-located with Wilmar’s food processing plant in the Taha industrial zone in Qiqihar City, China, in order to increase its production capacity.

“This joint venture is a great opportunity to build on the foundation of our yeast and bakery ingredients business in China.”

Wilmar chairman and CEO Kuok Khoon Hong said: “Besides enhancing the range of quality ingredients, this joint venture will enable us to leverage on AB Mauri’s baking know-how and technology to provide better service to the baking industry in China.”

The new company will aim for cost-competitive products and with its established portfolio, the JV will focus on capturing both traditional Chinese baked and western-style baked goods.