(Yicai Global) Sept. 7 -- Shares of China Feihe rose today after the country's biggest baby formula maker said that it is buying its largest milk supplier YuanShengTai Dairy Farm for HKD3 billion (USD387 million), following similar upstream purchases by its rivals.

China Feihe's stock price [HKG: 6186] jumped 3.2 percent to HKD17 (USD2.20) this morning, more than twice the Beijing-based firm's initial public offering price. The company went public last November, raising USD856 million, according to Bloomberg News.

The infant formula manufacturer would pay 63 Hong Kong dollar cents (US 8 cents) per share in cash, up 1.6 percent from YuanShengTai’s closing price on the latest trading day, the buyer said in a statement yesterday.

Chinese dairy companies have been increasingly looking to secure their supply of raw milk via big stock purchases. China Mengniu Dairy hiked its stake in China Modern Dairy Holdings to become the latter's controlling shareholder in 2017 and did the same to China Shengmu Organic Milk last July. Yili Industrial Group has taken control of Saikexing Reproductive Biotechnology Group and announced last month that it will become China ZhongDi Dairy Holdings's second-largest shareholder.

Securing milk supply is crucial for China Feihe as any disruptions could delay production and reduce sales, the firm said in its prospectus. Heilongjiang province-based YuanShengTai has provided China Feihe more than four-fifths of the latter's fresh milk over the past four years.

YuanShengTai’s stock price [HKG: 1431] fell 1.6 percent to 61 Hong Kong dollar cents this morning.

Editor: Emmi Laine