Chinese dairy firm Yili is issuing CNY9bn (US$1.33bn) of new shares to fund investments including the acquisition of a stake in the country’s largest organic milk producer, China Shengmu Organic Milk.
Yili, China’s largest dairy group, will take a 37% controlling stake in Hong Kong-listed China Shengmu Organic Milk for CNY4.6bn. The company will also use proceeds from its shares issue to invest in an operation centre and a milk production line in New Zealand, according to its filing to the Shanghai bourse.
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Shares in Yili had been suspended for five weeks over speculation that the group’s third largest investor, Sunshine Insurance Group, was preparing a hostile takeover. According to a filing from September, Sunshine had taken a combined 5% share in Yili via various subsidiaries.
At the time, the investor said it would not increase its stake further for one year adding that its move was a “financial investment” intended to help the firm’s “future business development”.
The Chinese press has largely viewed Yili’s share issue as a defence to a possible hostile takeover. The enlarged share capital dilutes Sunshine’s stake to 4.56%.
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By GlobalData
