Analysis of Arawana's Sale of Equity in Kellogg's China Business

Based on the collected data and market information, I will conduct a systematic and comprehensive analysis for you.

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Item	Details
Transaction Targets	50% equity stake in Kellogg’s Shanghai, 50% equity stake in Kellogg’s Kunshan
Counterparty	Mars Wrigley Confectionery (China) Co., Ltd.
Total Consideration	$60 million
Consideration Breakdown	Kellogg’s Shanghai: $45 million; Kellogg’s Kunshan: $15 million
Equity Structure Before Transaction	Joint venture owned 50% each by Arawana and Kellogg’s Hong Kong
Post-Transaction Status	Arawana will no longer hold equity in the two companies
Financial Impact	Expected to impact 2026 annual earnings by more than 10% of 2024 net profit attributable to parent company
Approval Level	Within the approval authority of the board of directors; no shareholder meeting approval required; does not constitute a major asset reorganization or connected transaction

• Valuation Institution: Walkson (Beijing) International Asset Appraisal Co., Ltd.
• Valuation Date: June 30, 2025
• Valuation Method: Income Approach
• Book value of Kellogg’s Shanghai: RMB 93.0784 million; Valuation value: RMB 633 million
• Book value of Kellogg’s Kunshan: RMB 109 million; Valuation value: RMB 215 million

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Based on data disclosed in Arawana’s 2026 Daily Connected Transaction Announcement [0]:

Indicator	Value (in $10,000)
Total Assets	19,822
Net Assets	10,154
Operating Revenue	18,443
Net Profit	2,226

Indicator	Value (in $10,000)
Total Assets	13,352
Net Assets	11,044
Operating Revenue	7,558
Net Profit	36

Contribution Indicator	Proportion
Operating Revenue Contribution	~10.92%
Net Profit Contribution	~61.14%

Although the Kellogg’s business accounts for only about 11% of Arawana’s total revenue, it contributes as much as . This indicates that the profit margin of the Kellogg’s business is much higher than that of Arawana’s core edible oil business.

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Entity	Transaction Consideration	Annual Net Profit	Valuation Multiple
Kellogg’s Shanghai (50% stake)	$45 million	$11.13 million (50% equity interest)	4.0x
Kellogg’s Kunshan (50% stake)	$15 million	$0.18 million (50% equity interest)	83.3x

• Receive approximately $60 million in cash proceeds, which can be used for core business development
• One-time investment income will be recorded in the 2026 financial statements
• Divest low-synergy business to focus on core grain and oil business

• Lose a high-margin business segment (accounting for about 61% of profit contribution)
• Overall profitability will face further downward pressure
• Business scale contraction may affect market position

Based on the latest market data [0]:

Valuation Indicator	Value
Market Capitalization	$161.13 billion
Current Stock Price	$29.72
Price-to-Earnings Ratio (P/E)	42.19x
Price-to-Book Ratio (P/B)	1.67x
Return on Equity (ROE)	4.02%
Net Profit Margin	1.54%

Arawana’s current P/E ratio stands at 42.19x, which is at a relatively high level, mainly reflecting the market’s premium for the company as an industry leader. However, considering the continuous pressure on the company’s net profit in recent years, the divestment of the high-profit business may exert negative pressure on its valuation.

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This transaction marks Arawana’s

, focusing resources on developing core businesses:

Core Business Segments	Features
Kitchen Foods	Basic consumer goods such as rice, flour, and edible oil, with leading market share
Feed Raw Materials and Oil Technology	Commodity trading with large scale and low profit margin
Other Businesses	Emerging growth drivers under cultivation

1. Focus on Core Business:
   Cereal breakfast has low synergy with Arawana’s core grain and oil business
2. Optimal Resource Allocation:
   Invest the recovered funds in the expansion of core businesses with higher returns
3. Risk Avoidance:
   Avoid fierce competition and regulatory pressure in the cereal breakfast market
4. Strategic Flexibility:
   As a global confectionery giant, Mars is better suited to operate cereal breakfast brands

• Arawana’s subsidiaries will provide service support to the target companies at a reasonable price within the agreed timeframe
• Kellogg’s Kunshan will continue to lease relevant factory buildings and land from Arawana’s subsidiaries (lease term: 3 years)
• Ensure a smooth business transition

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As seen from the stock price trend chart, Arawana’s stock price has dropped from $31.60 to $29.72 in the past three months, with a decline of approximately 5.95%.

Impact Dimension	Expected Change
Short-term	May receive positive stimulus from one-time investment income
Medium-term	Profitability will be under pressure, and profit margin may further decline
Long-term	Depends on whether core business growth can make up for the profit gap

1. Risk of Losing Profit Contribution:
   Losing the source of 61% of profit contribution
2. Risk of Business Scale Contraction:
   Revenue scale will decrease by approximately 11%
3. Risk of Valuation Pressure:
   The market may reevaluate the company’s growth prospects
4. Risk of Sustained Profitability:
   The company’s net profit has been declining for consecutive years in recent years [0]

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Arawana’s sale of equity in Kellogg’s China business is a

, which will have the following main impacts on the company:

• May receive support from one-time income in the short term
• In the medium to long term, divesting the high-profit business will exert pressure on valuation
• Need to pay attention to the profit improvement of core businesses

• Reflects the company’s strategic intention to focus on core businesses
• Conducive to optimal resource allocation
• Exits the cereal breakfast market to focus on the core grain and oil business

Investors need to closely monitor the actual financial impact of this transaction in the 2026 financial report, as well as the progress of profit improvement in the company’s core businesses. Considering the huge contribution of the Kellogg’s business to the company’s net profit (over 60%), this sale will have a profound impact on Arawana’s investment value.

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[0] Arawana API data and public market information
[1] Sina Finance - “Arawana Transfers 50% Equity Stakes in Two Participating Companies, Mars China Acquires for $60 Million” (https://finance.sina.com.cn/roll/2026-01-15/doc-inhhmamt4683880.shtml)
[2] Securities Times - “Arawana Transfers 50% Equity Stakes in Two Participating Companies, Mars China Acquires for $60 Million” (https://www.stcn.com/article/detail/3595697.html)
[3] East Money - “Arawana Plans to Transfer 50% Equity Stakes in Kellogg’s Shanghai and Kellogg’s Kunshan to Mars China” (https://wap.eastmoney.com/a/202601153620746791.html)
[4] Tencent PDF - Arawana’s 2026 Daily Connected Transaction Announcement (https://file.finance.qq.com/finance/hs/pdf/2025/11/28/1224831622.PDF)
[5] Sina Finance - Arawana’s 2025 Semi-Annual Report (http://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=300999&id=11295950)
[6] Weikehao - “Counterfeit Controversy, Pressure of Declining Revenue and Profit, Arawana’s Alarm and Clarion Call” (https://mp.ofweek.com/finance/a556714505467)