August 13, 2009

American Dairy Inc. will issue 2.1 million shares in a private placement to venture-capital firm Sequoia Capital for about US$63 million.

Shares were recently up eight percent at US$30 in premarket trading; the stock was up 85 percent this year through Tuesday (Aug 11). There are about 18 million shares outstanding.

The purchase price includes US$47 million in cash and the conversion of a US$16 million bridge loan the company got from Sequoia late last month.

The deal is expected to close August 27. Under the agreement, American Dairy will issue more shares to Sequoia if certain earnings targets this year and next year are not met.

Sequoia Capital will also nominate a representative to American Dairy's board.

American Dairy produces and distributes infant formula, milk powder and soy, rice and walnut products in China.