January 6, 2017

Mengniu buy-out offer to Modern Dairy: US$826 million

China Mengniu Dairy Co Ltd has offered to buy out China Modern Dairy Holdings Ltd for US$826 million in a deal that will help it secure a stable supply of raw milk, Reuters reported.

This follows Mengniu's purchase of 965.47 million shares in Modern Dairy at HK$1.94 each, from a joint venture of KKR China Growth Fund L.P. (KKR.N) and CDH Fund IV L.P, that raised its stake in Modern Dairy to 39.9% from the current 25.4%.

Under Hong Kong's corporate rules, the owner of more than a 30% stake in a company will have to make an offer to buy out the shares it does not already own.

Mengniu said it will make an offer for the remaining Modern Dairy shares at the same price of HK$1.94 each. It expects to spend another HK$6.4 billion (US$826 million) on that transaction, raising its stake further to 91%.

If the deal goes through, Modern Dairy will remain listed in Hong Kong as some of its shareholders, including chief executive Lina Gao, said they would not sell their stocks.

Headquartered in China's eastern province of Anhui, Modern Dairy is the country's biggest dairy company in terms of herd size and the largest raw milk producer.