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Why the Wattle Health Australia Ltd share price skyrocketed today

One of the biggest movers on the market today has been the Wattle Health Australia Ltd (ASX: WHA) share price.

Although it has given back some of its early gains, the health and wellness food products company’s shares are up 20% to 57 cents at lunch.

Why have its shares rocketed higher?

This morning the company announced that it has entered into a conditional agreement to acquire a 5% equity interest in Australian infant formula and nutritional products manufacturer Blend & Pack Pty.

Furthermore, major Wattle Health shareholder and Hong Kong-listed company Mason Financial Holdings has also committed to acquire a 75% equity interest in Blend & Pack.

The remaining 20% of equity will be retained by current shareholders of Blend & Pack.

Why is this important?

Blend & Pack is one of only eight manufacturing plants in Australia that currently holds CNCA accreditation. This allows it to nominate up to three brands to acquire China Inspection Quarantine.

As you might have guessed, one of these brands will be Wattle Health.

Blend & Pack has named Wattle Health as its first brand to be nominated for CIQ accreditation from January 1, 2018.

This means the company will have the accreditation required to sell its infant formula products into the Chinese market in stores and online from next year.

Should you invest?

This is undoubtedly another big step forward for the company and builds on its recent supply agreement with wholesaler and distributor Metcash Limited (ASX: MTS).

But it is still early days of course and faces stiff competition from the likes of a2 Milk Company Ltd (Australia) (ASX: A2M), Bellamy’s Australia Ltd (ASX: BAL), and even Bubs Australia Ltd (ASX: BUB).

So for now I plan to hold off an investment, but I’ll certainly be keeping a close eye on its progress and suggest fellow investors do the same.

Finally, if you're already invested in infant formula shares then I would suggest you diversify your portfolio and consider these high-flying growth shares.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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