May 3, 2004

 

 

China's Mengniu Dairy to Raise HK$1 Billion in Hong Kong Stock Market Floatation

An eFeedLink Exclusive Report
 

China's Mengniu Dairy is currently in the final stages of preparation for the enterprise's listing on the Hong Kong Stock Exchange. Mengniu is seeking to raise HK$1 billion to fund the enterprise's future expansion plans. Upon listing, Mengniu's market capitalization will increase from RMB700 million to HK$4 billion.

            

Public Listing By End-May 2004

 

According to industry sources, Mengniu should have been listed by mid-April in the Hong Kong Stock Exchange. BNP Paribas Peregrine, which is authorized by Mengniu to handle its listing case, had submitted a listing application to the Exchange. Mengniu Dairy is expected to raise HK$1.5-1.6 billion if the floatation in Hong Kong is approved.

     

Prior to the injection of capital by three other international companies, Mengniu has already registered its associate company, China Dairy (Mauritius) as a private limited company in Mauritius. This is widely seen as the enterprise's platform for subsequent listing in Hong Kong.

   

With the backing of three internationally renowned investment banks and holding companies, Mengniu has successfully make inroads into overseas capital markets within a short timeframe. Whether it chooses to be listed in Hong Kong, Singapore or Wall Street, Mengniu's major shareholders and strategic partners, namely Morgan Stanley, CGU-CDC China Capital Partners and Dinghui Investments (formerly China International Capital Corporation), will boost the standing of the Inner Mongolian-based dairy enterprise in the eyes of potential investors.

 

Mengniu Dairy is Morgan Stanley's Largest Direct Investment in China

 

From an investment risk perspective, Morgan Stanley's take up of Mengniu's shareholding, which has an initial net worth of RMB700 million, will enable the international investment bank to reap benefits upon the latter's successful listing. Mengniu's market capitalization will increase to HK$4 billion, if it can successfully raised HK$1 billion in its share offer to the public. According to listing regulations, the new share capital will form about 25% of the existing paid-up capital of the listing company.

   

The chairman of Mengniu Dairy, Mr Niu Gensheng, has intended to build alliance with internationally established investment companies to pave the way for making inroads into foreign capital markets. Morgan Stanley has been able to capitalize on opportunities offered by Mengniu.

 

Upon the successful listing of Mengniu, Morgan Stanley will not only rake in huge investment benefits. It will have bigger decision-making power in the boardroom of Mengniu in the areas of building alliance with other strategic partners and the sourcing of underwriters for listing of other subsidiaries. In fact, BNP Paribas Peregrine was recommended by Morgan Stanley to handle Mengniu's listing on the Hong Kong Stock Exchange.

 

Reportedly, Mengniu Dairy is now Morgan Stanley's largest direct investment vehicle in China. The America-based investment bank has pumped about RMB480 million into Mengniu Dairy. At this point, analysts are still unable to put an estimate to the returns on investment for Morgan Stanley's holding in Mengniu. However, they are certain that the investment bank will most probably be playing an even more active role in Mengniu Dairy's management, as well as in the broader Chinese market in the years to come.