New Hope to Be Number Two Holder of China China's Biggest Milk Producer
Liao Shumin
DATE:  Jul 19 2019
/ SOURCE:  yicai
New Hope to Be Number Two Holder of China China's Biggest Milk Producer New Hope to Be Number Two Holder of China China's Biggest Milk Producer

(Yicai Global) July 19 -- New Hope Dairy plans to buy 276 million newly issued shares of China Modern Dairy Holdings for CNY329 million (USD48 million) and 319 million current shares, for total investment of CNY709 million.

The Chengdu, Sichuan province-based firm will thus become the second-largest shareholder of Maanshan, Anhui province-headquartered Modern Dairy, which is China's largest cow breeder and raw milk producer, with a 9.3 percent share upon completion of the deal, New Hope said in a statement yesterday.

The pair will bolster their cooperation in the upstream raw milk business.

Formed in 2005, Modern Dairy operates 26 farms, each with over 10,000 cows, in Sichuan, Anhui, Hebei, Shandong and three other provinces. Mengniu boosted its stake in it to about 60 percent in 2017 to become its controller.

Modern Diary previously pledged the current shares to be acquired to secure loans and will redeem the shares with the proceeds from their sale. The company will thus lower its leveraging through this equity financing, cut financing costs and lift its operating efficiency.

New Hope has 13 major dairy brands, 14 processing plants and 11 proprietary pastures across China. An abundant milk supply will undoubtedly form a basis for its further growth after its alliance with Modern Dairy.

New Hope's new share subscription price is CNY1.35 (20 US cents), a discount of about 2.6 percent on Modern Dairy's closing price of CNY1.39 yesterday. Modern Diary's shares [HKG:1117] fell after opening and were down 1.44 percent at HKD1.37 (USD0.17 cents) at the lunch bell today.

New Hope's stock [SHE:002946] gained after opening and rose to 1.15 percent to CNY14.93 in the morning. 

Editor: Ben Armour

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Keywords:   New Hope Dairy,China Modern Dairy Holdings