Poultry
xClose

Loading ...
Swine
xClose

Loading ...
Dairy & Ruminant
xClose

Loading ...
Aquaculture
xClose

Loading ...
Feed
xClose

Loading ...
Animal Health
xClose

Loading ...
Undefined


August 28, 2013

 

China's Liaoning Huishan to raise US$1 billion in Hong Kong IPO

 

 

Liaoning Huishan Dairy hopes to launch the pre-deal marketing work on its initial public offering (IPO) in Hong Kong on Monday (Sep 2) to raise about US$1 billion to plough more funds into increasing its herd and improving milk yields.
 
The company will put its application before the Hong Kong stock exchange's listing committee on Thursday (Sep 5).
 

Huishan, which has 110,000-strong dairy herd and about one million acres of grassland in Liaoning province, northeast of Beijing, raised nearly US$300 million two years ago from investors including Hong Kong's private Chow Tai Fook empire of tycoon Cheng Yu Tung. Huishan reckons it can get to 500,000 cattle with the IPO proceeds, according to one banker familiar with the business.

 
Chinese consumers drink less than half as much milk as their Asian peers on a per-capita basis, but demand is growing strongly. This has created shortages in fresh milk and lifted imports of powdered milk by five times since 2008, according to analysts.

 

Jamie Zhou, analyst at Macquarie, said China had been in the grip of a second dairy revolution since the government launched a programme to strengthen food safety, eliminate smaller, weaker processing companies and promote large-scale industrial dairy farming. Smaller farmers are being forced to exit the industry as their milk yields are too low to be economically viable in spite of rising prices.

 

"Their accelerated exits are making an even stronger case for developing scaled dairy farms, yet scaled operators only accounted for 16% of total raw milk," Zhou wrote in a recent note.

 

Chinese dairy producers have been fighting to regain consumer trust after a scandal over contaminated baby milk in 2008. China Mengniu Dairy, one of the big Hong Kong-listed Chinese dairy groups along with China Modern Dairy, was hit hard by the scandal. It has been rebuilding its reputation through deals including a joint venture to make yoghurt with Danone of France.

 

This month Fonterra, the farmers' collective that controls most of New Zealand's dairy industry, was forced to recall milk powder from China after it found bacteria in some of its products that could cause botulism.

 

This was a boon to Chinese dairy groups - both Mengniu and China Modern's shares rose sharply in the days after the first recall was announced, though they have settled back to their earlier levels.

 

Huishan is entering a stock market where its peers have done well over the past year - China Modern shares are up 15.5% while Mengniu's are up more than 30%. Both have outperformed the Hang Seng index, which is up 10.5% over the period.

Share this article on FacebookShare this article on TwitterPrint this articleForward this article
Previous
My eFeedLink last read