American Dairy has made a loan of approximately US$10m million to an acquisition entity in order to make a deposit or advance payment in the purchase of a stake in Ausnutria Dairy (Hunan) Company Ltd.

Ausnutria is a privately held distributor of high-quality nutritional, powdered milk and infant formula products based in Changsha, Hunan Province, China.

American Dairy, which is one of the leading producers and distributors of milk powder and soybean products in China, said the loan is intended to result in American Dairy acquiring a 49% interest in Ausnutria. through a series of proposed transactions that have yet to be consummated.

"The company cautions that there can be no assurance or guarantee that the proposed transactions will be consummated," it said, however.

Upon completion of the proposed transactions, American Dairy plans to enter into a strategic partnership with Ausnutria with the goal of leveraging their respective brands and retail and distribution networks, and to generate manufacturing and cost synergies.

Leng You Bin, chief executive officer of American Dairy, said: "Today's announcement demonstrates our plans to deploy capital to generate a return. We are positioning American Dairy to be the leading high quality, premium consumer brand company in China and today's announcement is another step in this long term plan."