A move by Chinese dairy giant Inner Mongolia Yili Industrial Group Co. to acquire a stake in local peer Shengmu Organic Milk has hit the buffers after the companies failed to secure regulatory approval for the transaction.

Yili announced in October a deal to buy a 37% stake in Shengmu for CNY4.6bn (US$670.2m). To pay for the stake, Yili planned to issue more shares in its business.

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However, in a joint statement to the Hong Kong Stock Exchange on Friday (28 April) to say the companies had not received the green light from the Chinese government.

Hong Kong-listed Shengmu insisted the scrapping of the deal “will not affect the company’s position as a leading organic milk supplier in the PRC”.

It added: “Yili, as a dominant player in the milk industry in the PRC, will continue to support the growth and development of the raw milk business of the company.”

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