January 5, 2010

China's Shanghai Bright Food gets green light to increase stake

China's Shanghai Bright Food (Group) Co has received approval from the Chinese authorities to acquire Shanghai Industrial Holdings' (SIH) stake in its subsidiary Bright Dairy & Food Co.

Bright Food, the parent company, plans to buy 314 million shares or a 30.18% stake in its listed entity Bright Dairy from the Hong Kong-registered SIH for RMB1.55 billion (US$227 million).

Following the transaction, Bright Food, together with its other subsidiary Shanghai Milk Group, will become Bright Dairy's controlling shareholders with 65.45% stake.

Analysts believed that the transaction would allow the company to have greater control over the quality of its products. In the wake of the melamine scandal in 2008, quality control is regarded as the greatest challenge for domestic dairy firms since many overseas companies decided to exit their local joint ventures.