November 13, 2013
China Mengniu buys shares of YuanShengTai Dairy Farm
Riding on the strong demand for dairy stocks, YuanShengTai Dairy Farm, a Heilongjiang-based producer of raw milk, boosts deal size to US$500 million, with Mengniu among its key investors.
YuanShengTai has started a one-week bookbuilding campaign for its US$500 million Hong Kong float on the back of positive sentiment for new shares.
The firm is selling 1.22 billion shares or 31.25% of its enlarged share of capital, at an indicative range of HKD2.49 (US$0.32) to HKD3.18 (US$0.41) each, which translates into a price-earnings ratio of up to 20 times based on next year's expected earnings.
Under the latest arrangement, about 20% are old shares, while the rest are new.
Bankers said the deal was enlarged from an original US$200 million because of recent institutional demand for dairy stocks after shares of newly listed China Huishan Dairy rose more than 15% from their offer price in September. Pricing is slated for November 19 and the shares are scheduled to begin trading on November 26.
China Cinda Asset Management and Qinhuangdao Port have started pre-marketing for their listings to raise a combined US$3.5 billion.
Meanwhile, bankers said China Everbright Bank, a Shanghai-listed lender, was still gauging market demand before launching its planned US$4 billion share sale in Hong Kong after pulling back twice for the past several years.
China Mengniu Dairy, the country's largest dairy producer, has agreed to subscribe US$60 million worth of YuanShengTai shares as a cornerstone investor. The stake represents 12-15% of the entire deal, depending on final pricing.
On a separate note, Mengniu said it agreed to sell 471.13 million shares of infant formula producer Yashili International at HKD3.50 (US$0.45) each to a consortium of investors including Singapore state investment company Temasek, China-focused private equity firm Hopu and three other companies held by individual investors. The sell-down helped raise HKD1.65 billion (US$213 million) for Mengniu, according to a statement posted on the Hong Kong stock exchange.
Mengniu, with products ranging from milk to yogurt and ice cream, offered US$1.6 billion in June for all of Yashili, but the deal fell apart after the firm received only 89.82% of Yashili's shares - below the 90% threshold required to acquire all the remaining Yashili shares and delist the company from the stock exchange.
Under the purchase agreement, Mengniu bought a 75.3% stake in the formula maker from chairman Zhang Lidian's family and Washington-based private equity firm Carlyle.
