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France鈥檚 Danone to spend US$665m to raise stake in Mengniu Dairy
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FRENCH food company Danone has raised its share in the Hong Kong-listed Mengniu Dairy Co, the biggest dairy operator in China’s mainland, to boost its sales in the country.
The move comes as foreign companies are betting on higher demand in China for quality food and dairy products.
Danone will purchase 121.2 million new shares of Mengniu with HK$5.15 billion (US$665 million) through a joint venture with the State-owned COFCO Group, according to a joint statement from the two companies today.
Shares of Mengniu jumped 2.99 percent to close at HK$37.95 today.
Danone will subscribe to Mengniu's new shares at HK$42.50 apiece, a 15.3 percent premium over Mengniu's closing price on Tuesday, and will raise its stake in Mengniu to about 9.9 percent from 4 percent.
Mengniu said in the statement that the deal will strengthen its partnership with Danone and provide it with a better position from which to capitalize on other opportunities.
The proceeds from the new shares subscription will be used by Mengniu to repay its debts and strengthen its financial capabilities.
Last year, Danone spent altogether 2.6 billion yuan to purchase 4 percent of stake in Mengniu along with establishing a joint venture with the Chinese dairy company to combine the two companies' chilled yogurt businesses.
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