Chinese infant formula maker Yashili International Holdings has announced the planned acquisition of Mengniu Dairy Co.'s milk powder business in a HK$1.3bn (US$167.7m) deal.

Announced on the Hong Kong stock exchange yesterday (21 September), Yashili, in which Mengniu Dairy is an investor, has conditionally agreed to purchase the entire issued share capital in Oushi Mengniu.

Ouishi is engaged in the manufacturing and sales of paediatric milk formula products and milk powder products for adults. The total revenue of Oushi Mengniu for the year ended 31 December 2014 was CNY724m.

In a statement, Yashili said the move would "enable the group to focus on milk powder business with a view to increasing market share and achieving economies of scale". The company said the deal would also help "optimise" its production network and reduce production costs by acquiring "advanced production facilities for milk powders located in key areas of milk production, and; reduce competition with the company’s controlling shareholder, Mengniu Dairy".

An independent board committee has been established to consider the terms of the acquisition and to advise shareholders on how to vote at the EGM. Upon completion, Oushi Mengniu will become an indirect wholly-owned subsidiary of Yashili.

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By GlobalData