Modern Dairy Jump on Possible Asset Sale: Hong Kong Mover

China Modern Dairy Holdings (1117) jumped the most in more than three weeks in Hong Kong trading after the raw milk producer said it has held preliminary discussions over a possible asset sale.

Modern Dairy rose as much as 4.5 percent to HK$2.54, the most since March 28, before trading at HK$2.45 as of 11:35 a.m. local time. The company has held talks with a third party in connection with an asset disposal and hasn’t entered into any definitive agreement, it said today in a statement to Hong Kong stock exchange.

China Mengniu Dairy Co. (2319), the country’s largest dairy producer, said today there have been informal talks with a Hong Kong-traded company which engages in the dairy farming business. Bloomberg News reported in August that China Mengniu held talks to acquire Modern Dairy, and that the companies’ largest shareholders, COFCO Corp. and KKR & Co., were involved in the discussions.

The talks were “very preliminary” and China Mengniu Dairy hasn’t made any decision regarding the acquisition, it said in the statement to the Hong Kong Exchange, without identifying the other company.

Mengniu Dairy climbed as much as 2.6 percent to HK$22.05 in Hong Kong and traded at 1.86 percent higher as of 11:36 a.m. local time. The benchmark Hang Seng Index gained 1 percent.

Buying Modern Dairy would give Hohhot, Inner Mongolia-based Mengniu more control over its milk supply amid concerns about product safety in the dairy industry. Demand for milk is rising in China as economic growth boosts incomes.

Retail sales of milk will almost double to 147.4 billion yuan ($23.9 billion) in 2017, from 76.1 billion yuan in 2011, according to data from Euromonitor International.

State-owned COFCO holds about 20 percent of Mengniu, while New York-based private equity firm KKR owns 24 percent of Modern Dairy, according to data compiled by Bloomberg.

Frank Ning, chairman of Mengniu, told Bloomberg News in January that it held acquisition talks with supplier China Modern and the discussions didn’t advance.

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

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.