Hopu Investment Management – a mainland Chinese fund backed by Temasek, Singapore’s state investment agency, and Goldman Sachs – has teamed up with a Chinese state-owned company to form a consortium to invest in the dairy producer.
The consortium is expected to take a 20% stake and become the largest shareholder in Mengniu, China’s biggest maker of liquid milk.
As a result of the investment, the consortium is expected to have the right to appoint at least one board member and help to push through significant changes to the company’s corporate governance and operations.
Mengniu’s Hong Kong listed shares were suspended on Monday pending an announcement.
Hopu is a $2.5bn fund run by Fang Fenglei, Goldman Sachs’ China partner. In recent months, the fund has led high-profile, multi-billion dollar acquisitions of stock in Chinese banks sold by Royal Bank of Scotland and Bank of America.
The investment in Mengniu is the latest into the sector as the industry seeks to modernise after it emerged last year that 22 dairy companies had sold products that contained melamine, an industrial chemical that boosts protein levels but in high doses can cause kidney stones.
More than 50,000 children fell ill and four infants died. The scandal led to worldwide recalls of foods that contained Chinese dairy ingredients and tarnished the image of Chinese products well beyond the dairy industry. The scandal highlighted gross inefficiencies in quality control of China’s fragmented and rapidly growing dairy industry.
Source: The Financial Times
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