Coty Group or Ding Jiayi purchases 50% to 60% of the shares, and the domestic chemical brands are worried about being "snow-covered".

Rumors of Ding Jiayi’s acquisition for months were finally settled. Yesterday, the world’s No. 1 perfume manufacturer, the fifth-largest cosmetic company Coty Inc., and Chinese domestic brand Ding Jiayi officially announced that they have reached a share purchase agreement. According to the agreement, Coty will receive a majority of the shares of Dingjiayi Holdings. Both parties expect the transaction to be completed in January 2011.

Since last year, the news that Ding Jiayi will be acquired has quietly spread in the industry, but it has not been confirmed. According to industry sources, Ding Jiayi's parent company, Bessie Biochemical (Suzhou Industrial Park) Co., Ltd. has been in frequent contact with a number of foreign companies since 2009, including the Coty Group. Earlier this year, the two sides basically reached an agreement, leaving only the key price issue yet to be finalized.

But this time, the two sides did not disclose the specific financial terms of the agreement, including the acquisition amount. A senior Ding Jiayi disclosed to the "First Financial Daily" that Coty's shares were between 50% and 60%, while Coty promised to retain Ding Jiayi's existing management and staff.

In the 1990s, a large number of Chinese companies, in order to achieve rapid growth, have embarked on a joint venture with multinational corporations. The result was counterproductive. Local brands such as “Little Nurse” have been “snow-covered” in history immediately after being acquired by foreign investors, making it unforgettable. With four production bases in the country, Ding Jiayi, whose skin care brand includes “Ding Jiayi” and “Pure Plants,” will repeat the same mistakes.

Gu Jun, deputy secretary-general of the Department of Cosmetics and Cleaning Products of the China Department Stores Business Association, told the reporter that the situation of Ding Jiayi is not the same as that of the nurse. At the beginning, the nurse had transferred all the shares to L'Oréal. However, Ding Jiayi's original shareholders still hold about 40% of the shares. It is believed that Ding Jiayi's team still hopes to make this brand bigger and stronger instead of exchanging direct benefits.

Lin Li, Director of Marketing Department of Ding Jiayi, also told reporters that before cooperating with Coty, Ding Jiayi also visited Coty for a long time. Coty is a company that fully develops its own brand. Moreover, Ding Jiayi's original team still holds part of the equity and the right to speak louder.

Gu Jun also said that unlike Little Nurse and L'Oreal Garner under the brand competition, Ding Jiayi brand and Coty's existing product brands will not basically constitute a direct competition. Ding Jiayi’s products are mostly channeled by ordinary supermarkets, and Coty’s existing brands are relatively high-end, and most of the brands use sales channels for supermarket counters.

However, according to the reporter's understanding, the two sides did not reflect Coty's future investment in the Ding Jiayi brand. Another Ding Jiayi executive disclosed that Ding Jiayi and Coty had already formulated a plan for the development of Ding Jiayi next year.

Feng Jianjun, a daily chemical expert, believes that in terms of market structure, Coty’s acquisition of Ding Jiayi is likely to have a certain impact on China’s daily chemical sector.

An industry source told reporters that Ding Jiayi products, including facial cleanser, facial mask and sunscreen, currently have sales of 600 million to 800 million yuan. “At the retail terminals such as supermarkets, their products are still very good, and in the domestic brands, they can remain in the top three positions.” Reuters news also said that Ding Jiayi completed the national marketing network in China in 2001. The layout of the country so far has about 20,000 sales outlets.

Then why did Ding Jiayi still seek cooperation with foreign investment? Mr. Zhuang Wenyang, founder and chairman of Ding Jiayi, said: “Ding Jiayi hopes to rely on Coty's global network and marketing expertise to achieve faster growth.”

The above-mentioned industry insiders told the reporter that although Ding Jiayi ranks high in domestic daily chemical companies, its development over the years has been tepid. Nivea, Olay, Garnier, Ponds and other foreign brands, the price of similar products and Ding Jiayi almost, so the impact on the Ding Jiayi in the supermarket is still very large. In this cooperation with Coty, Ding Jiayi can obtain the investment of the international group. For Ding Jiayi, it is a good thing that can break through the bottleneck of its own development.