J&J, Dabao merger faces difficulties

Published: 25-Oct-2006


A merger acquisition agreement between Johnson & Johnson and Dabao faces complications by a new regulation issued by the Chinese Ministry of Commerce. The new regulation, implemented on 8 September, protects the Chinese industry from mergers by leading international giants.

The intended agreement will have far-reaching implications for the future of mergers in China. Industrial analysts are nervous about Chinese consumer goods being taken off the market, but the regulations are a normal business move to strengthen profits and promote brands.

Under plans for the deal with Dabao, Johnson & Johnson will hold a 51% stake and offer 'unconditional accommodation' to all of Dabao's disabled employees. Dabao has a number of employees with disabilities and learning difficulties and the new venture will offer them contracts without fixed terms. Dabao produces low and medium-end cosmetic products and is 83% state-owned. Employees own 17% of the business.

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