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A2 Milk shares jump 7% on big China and special dividend news

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Smiling young parents with their daughter dream of success.

A2 Milk Company Ltd (ASX: A2M) shares are starting the week strongly.

In morning trade on Monday, the infant formula company’s shares are up 7% to $7.20.

This compares favourably to the performance of the ASX 200 index, which is down slightly at the time of writing.

Why are A2 Milk shares jumping?

Investors have been fighting to get hold of the company’s shares this morning after it made a big announcement relating to its China business.

According to the release, A2 Milk has received approval from the State Administration for Market Regulation (SAMR) to transition the two China label infant milk formula (IMF) product registrations that were acquired in connection with the a2 Pokeno facility to a2 branded products.

The company notes that this represents the final step pursuant to the terms of its acquisition of the a2 Pokeno facility for the relevant registrations to be utilised under the a2 brand.

And with regulatory approvals now obtained, it confirmed that it no longer has the right to unwind the acquisition of the a2 Pokeno facility.

In light of this, A2 Milk advised that it expects to launch the new products later this calendar year. This is within existing expectations so there has been no change to the timing or estimated financial benefits provided to the market at the time of announcing the acquisition.

‘A significant milestone’

A2 Milk’s managing director and CEO, David Bortolussi, was pleased with the news. He said:

SAMR approval marks a significant milestone in our China growth strategy and Supply Chain transformation. It supports long-term growth in our core IMF business through market access and innovation, accelerates the development of advanced nutritional manufacturing capability, and captures attractive financial returns through incremental brand contribution and vertical margin capture.

Special dividend incoming

Also giving A2 Milk shares a boost is an update on its special dividend plans.

The company notes that it previously indicated that it would look at declaring a special dividend once the required regulatory approvals were received in connection to its China label registrations.

This morning, it advised that it expects the A2 Milk Board to convene soon with the intent to declare a $300 million special dividend that will be fully franked and unimputed.

The timing of payment and other details will be confirmed in a separate announcement once the special dividend has been declared by the Board.

The post A2 Milk shares jump 7% on big China and special dividend news appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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