Modern Dairy Jumps as Mengniu Confirms Talks

(Corrects third paragraph in story published Jan. 15 to show discussions took place that didn’t yield progress.)

China Modern Dairy Holdings Ltd. (1117) surged to an almost 20-month high after China Mengniu Dairy Co. (2319), the country’s biggest dairy producer, confirmed it had been in talks to acquire the supplier.

Modern Dairy jumped 9.9 percent to HK$2.55, the highest close since June 2011. China Mengniu dropped 2.1 percent.

There were discussions, and there wasn’t much progress, Frank Ning, chairman of Mengniu, said after delivering a speech at a Hong Kong conference yesterday.

Buying Modern Dairy would give Mengniu more control over its milk supply as concerns about safety in the nation’s dairy industry linger. Maanshan-based Modern Dairy supplies Mengniu with unpasteurized milk.

Excessive toxins were found in milk at one of the Mengniu’s warehouses in 2011. The company blamed the contaminants on moldy feed given to cows.

A Hong Kong-based investor relations representative at Modern Dairy, who said his last name was Wong, declined to comment on the talks or give his full name when reached by phone today.

Ning, who is also the chairman of COFCO, said he didn’t know when an agreement can be reached. COFCO, a government- backed company that has businesses ranging from food to grain trading, holds about 20 percent of Mengniu according to data compiled by Bloomberg.

Photographer: Nelson Ching/Bloomberg

Cartons of China Mengniu Dairy Co. milk are for sale at a store in Beijing, China. Close

Cartons of China Mengniu Dairy Co. milk are for sale at a store in Beijing, China.

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Photographer: Nelson Ching/Bloomberg

Cartons of China Mengniu Dairy Co. milk are for sale at a store in Beijing, China.

The two companies have held discussions on a possible deal, Bloomberg reported in August.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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