China Mengniu Dairy subsidiary ups its stake in Shanghai Milkground

China Mengniu Dairy, through its subsidiary Inner Mongolia, has agreed to up its stake in local cheese manufacturer Shanghai Milkground for a total value of ¥3 billion ($459 million).

The transaction includes the purchase of more than 100 million shares and will see Inner Mongolia increase its stake in the Chinese dairy company to 23.8% from the 5% it acquired in March.

Upon completion of the deal, Inner Mongolia will become the controlling shareholder of Shanghai Milkground, marking the dairy giant’s aim to broaden its cheese portfolio.

Until then, Ms Chai holds approximately 19.88% interest in the company and remains the existing controlling shareholder.

Shanghai Milkground Food Tech Company is involved in the manufacturing and distribution of dairy products such as cheese, liquid milk, butter, cream, condensed milk and cheese slides. It operates five manufacturing facilities across China.

According to the official filing, the company’s cheese business has seen rapid expansion in recent years and has become a leading enterprise in the cheese industry in China.

Inner Mongolia says the investment is in line with its development strategies as it recognises Shanghai’s long-term development potential and future prospects.

A non-wholly owned subsidiary of China Menginu, Inner Mongolia is involved in the manufacturing and distribution of dairy products including liquid milk and ice cream in China.

The share subscription agreement, which is subject to approval, will be funded by internal resources of the group and bank financing.