Fonterra has refused to be drawn on speculation a Chinese state investment vehicle is in talks to invest in the dairy giant’s new shareholder fund.

The New Zealand dairy giant is in discussions with China Investment Corp. over buying into a trust set up last month, The Wall Street Journal reported.

The Fonterra Shareholders’ Fund is designed to give third-party shareholders exposure to the business for the first time through the purchase of units. Investors can buy non-voting units but can collect dividends and benefit from any growth in profits at the world’s largest dairy exporter.

The fund will be listed on both the New Zealand and Australian stock exchanges, with a float expected this month.

Speaking to just-food, Fonterra refused to say whether it was in talks with the Chinese state fund.

“Fonterra and the joint lead managers [of the fund] have spoken with a large number of institutional investors, as would be expected for an offer like this. These meetings are confidential. Until the bookbuild process has been completed, it is impossible to know what any institution’s ultimate intention might be,” the company said.

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Fonterra is building what it calls a “hub” of dairy production in China’s northern Hebei province. Last month, it announced plans for two new farms in Hebei, creating a hub of five in the province. The five farms will produce 150m litres of milk a year. Fonterra wants to construct more hubs in China and is aiming to produce 1bn litres in the country by 2020.

Fonterra’s first processing venture in China collapsed in 2008 after the group’s local partner Sanlu was found to have sold infant milk formula contaminated with industrial chemical melamine.

The scandal, which killed six babies and sickened hundreds of thousands of others, hit China’s fledgling dairy industry with over 20 companies caught up in the contamination.

Fonterra’s venture involved a stake in Sanlu and, although the dairy giant denied approving the use of melamine and was cleared of any wrong-doing, it wrote off its investment in its partner.

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