Mengniu Dairy has agreed to acquire more than 965 billion shares in China Modern Dairy, equivalent to almost $241.5 million, from Success Dairy II.
The transaction will increase Mengniu’s holding in China Modern Dairy from 25.4% to 39.9%. Following completion, Mengniu will be required to make a mandatory cash offer for all the remaining issued shares and options in China Modern Dairy.
That buyout would increase Mengniu’s stake further to 91%, allowing for 9% of shareholders who have refused to sell their stakes to Mengniu, costing it a reported $826 million.
The value of the offer is representative of $0.25 per share.
China Modern Dairy is based in Anhui province, west of Shanghai. According to the company, it is the largest dairy farming company in terms of herd size as well as the largest raw milk producer in China.
In the first half of 2015, it recorded pre-tax earnings of $123 million from total revenue of $350 million.
Revenue from liquid milk products accounted for almost a third of its total income – an increase of more than 170%.
In October, rival dairy company Yili agreed to pay $680 million for a 37% stake in China Shengmu Organic Milk, the only dairy company in the country to produce certified European-standard organic milk.
The move ‘could help the country’s leading dairy producer win over increasingly affluent customers seeking healthier food options’, analysts at Bloomberg said at the time.
It represented Yili’s intention to compete for position with Mengniu in the global organic market.
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