Mengniu Dairy Gains on Arla’s Stake Purchase: Hong Kong Mover

Mengniu Dairy Gains on Arla’s Stake Purchase
A shopper browses for China Mengniu Dairy Co. milk products in a supermarket in Beijing. Photographer: Danfung Dennis/Bloomberg

China Mengniu Dairy Co., the country’s largest milk producer, rose the most in 14 months in Hong Kong trading after saying Denmark’s Arla Foods amba plans to buy a 6 percent stake.

The shares climbed 6.8 percent to close at HK$21.15, the most since April 4 last year. The benchmark Hang Seng Index rose 1 percent.

Mengniu Dairy will develop and market Arla Foods’ products in China and other countries, and was also selected to set up a China-Denmark milk technology center, according to the company. The investment by Arla, the Nordic region’s biggest milk producer, comes as China set up new measures to improve food safety and Inner Mongolia Yili Industrial Group Co. recalled some baby formula after finding abnormal levels of mercury.

The agreements coincide with a visit to Denmark by Chinese President Hu Jintao last week. Arla said it will invest 1.7 billion kroner ($289 million) in China, including the acquisition of about 6 percent in Mengniu, to help boost sales in the nation fivefold by 2016. Last year Arla’s revenue from China was about 700 million kroner.

The companies didn’t provide pricing details for the deal.

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