China Mengniu Dairy plans to raise HK$3.06bn (US$394.6m) through the issue of new shares to China National Oils, Foodstuffs and Cereals Corp (COFCO) and Hopu Investment Management.
The company announced today (6 July) that Hopu and COFCO would collectively hold a 10.01% stake in the enlarged company.
COFCO, China’s largest food import-export company, and Hopu, the buy-out fund raised by Goldman Sachs’ China partner Fang Fenglei, will pay HK$17.60 per share, which represents a 7.85% discount on the Mengniu’s closing price of HK$19.10 on Friday – the last trading day before the deal was announced.
The shares will be purchased thorough a special purchase vehicle, in which COFCO will hold 70% while Hopu will own the remaining 30%.
In a statement to the stock exchange, Mengniu said that it would use the proceeds to “expand its existing operation” or to pursue “opportunities which may arise as a result of the upstream milk source consolidation and development in dairy product industry”.
A spokesperson for Hopu told just-food that the investment fund saw “considerable opportunity” in China’s dairy sector.
The Chinese dairy industry was wracked by last year’s melamine contamination scandal, which resulted in the hospitalisation of tens of thousands of children across the country. While the scare resulted in a drop in dairy consumption, industry watchers have suggested that the high-growth sector is now ripe for consolidation.
Hopu’s deal with Mengniu marks the second significant private-equity investment in a Chinese dairy company in a matter of weeks.
Last month, Kohlberg Kravis Roberts & Co announced that it had completed a series of investments in Chinese dairy Ma Anshan Modern Farming Co.