The a2 Milk Company is a producer of milk containing just the A2 protein by using cows that naturally produce just the said protein. The a2 Milk brand was expanding very quickly across ANZ and parts of SouthEast Asia. Their entry into China proved to be very successful and A2M was growing at over 60% year-on-year.

In order to sell in China, A2M relied heavily on the Daigou channel and given that travel has been non-existent between the two countries and with no resumption not in sight, shares began to plunge in early December as soon as the company downgraded its outlook for the financial year once again. The stock has continued to fall in 2021 as things haven’t really got better for the Daigou channel.

Why did A2 Milk Shares up on ASX today?

This morning, a2m shares were extremely upbeat as there was rising speculation on the potential takeover offer. The Australian newspaper reported this morning that the world’s largest food company, Swiss-based Nestle SA (SWX: NESN) is interested in potentially acquiring a2 milk.

As A2M struggles to make a mark in China and South East Asia without the Daigou channel, any potential deal with Nestle would mean that Nestle will be able to leverage their exceptional penetration and distribution in Asia to integrate a2m products and revive them.

The purely speculative nature of this deal brought a lot of attention as investors were seen reacting to the news and the A2M share price rose over 11% in trading today. Nestle however has not made any approaches so far. But with A2M shares trading at a massive discount to pre pandemic highs, and their results due on the 26th of August, the A2M share price has come under close watch. A2M shares closed at $6.68 a share today.

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