Images

Image source: Synutra.

What happened

Synutra International, Inc. (NASDAQ:SYUT), the Chinese company that makes baby formula and other supplements, announced on Thursday after the market closed that the company is going private in an equity buyout. Shares are up more than 17% Friday as of 11 a.m. EST on the news.

So what

In the company's official release about the buyout offer from Beams Power Investment Limited and acceptance by Synutra's board, it announced that shareholders will receive $6.05 in cash for each share outstanding. Shares are currently trading around $5.30. This discrepancy is likely because the deal still needs stockholder approval and to meet certain regulatory requirements.

Now what

The baby food market in China is likely to boom in coming months and years as the Chinese government announced a year ago that the infamous one child policy will be phased out. Even though Synutra was one of the purest plays in this growing market, there are others. Mead Johnson Nutrition Co. (NYSE:MJN), the pediatric nutrition company that makes the baby food brand Enfamil, gets a sizable chunk of its sales from China. Baby formula is also an important segment for food giants like Nestle (NASDAQOTH:NSRGY), which counts China as a growth market for its brands.

Seth McNew has no position in any stocks mentioned. The Motley Fool recommends Nestle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.