Yili plans investment in raw milk supply

Yili plans investment in raw milk supply

Chinese dairy Yili Industrial Group has confirmed plans to invest US$50m in Hong Kong dairy firm China Huishan Dairy Holdings Co. as part of its drive to secure its milk supply.

China Huishan Dairy Holdings Co. is reportedly looking to raise around up to $1.3bn through an IPO in Hong Kong. 

In a filing with the Shanghai Stock Exchange today (9 September), Yili said the investment was part of its management strategy and investment plan. It said the move would help strengthen its partnership with Liaoning Huishan and secure a "long-term" and "stable" raw milk supplies in north-east China.

The main business of Liaoning Huishan is dairy farming and the company operates 50 ranches, with a dairy cattle herd of 11m head.

The Wall Street Journal said the company had secured three cornerstone investors. The two others, it said, are Norges Bank, Norway's central bank, and the private-equity arm of Chinese state-owned food group Cofco.

China Huishan Dairy Holdings Co. is looking to offer 3.79bn shares for between HK$2.28 and HK$2.67.

Yili's move comes amid a push from dairy manufacturers in China to build integrated supply chains that lessen the risk of food safety scares. Food safety in the Chinese dairy sector has long been in the spotlight, with a number of high-profile recalls including the 2008 melamine scandal that sickened thousands and resulted in the death of six babies.

Click here to view the regulatory announcement.