Bright Dairy Plans to Acquire Raw-Milk Supplier From Parent

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Bright Dairy & Food Co., China’s third-largest milk producer by market value, plans to purchase raw-milk supply operations from its state-owned parent.

The company will acquire cattle-breeding and raw-milk businesses from Shanghai Dairy Group, a unit of Bright Dairy’s parent, group spokesman Pan Jianjun said by phone Thursday. The deal will help Bright Food Group Co. consolidate more dairy operations under its main listed arm, Pan said.

Bright Food Group, controlled by the Shanghai government, joins state-owned Cofco Corp. in trying to boost competitiveness by merging some of its disparate businesses. The move would help Bright Dairy ensure a reliable raw milk supply as it seeks to boost beverage sales in Asia’s largest economy.

“This is a good news for Bright Dairy,” Li Xiaolu, a Shanghai-based analyst at Capital Securities Corp., said by phone Friday. “The proposed purchase would help it secure long-term raw milk supply at a relatively stable cost.”

Cattle Breeding

Shanghai Dairy Group’s cattle-breeding operations include 24 dairy farms with more than 35,000 cows, according to its website. China Mengniu Dairy Co., the nation’s second-largest milk producer, bought a 27 percent stake in China Modern Dairy Holdings Ltd. in 2013 to secure preferential purchase rights to Modern Dairy’s raw milk supply.

A public-relations representative for Shanghai Dairy said by phone Friday the company is evaluating the transaction price.

Shares of Bright Dairy dropped as much as 7.2 percent in Shanghai trading Friday, after China’s Ministry of Commerce said it will gradually remove tariffs on imports including Australian dairy products. The country’s top dairy producer, Inner Mongolia Yili Industrial Group Co., declined as much as 5 percent.

Bright Dairy said earlier this month it will seek as much as 9 billion yuan ($1.45 billion) in a private share placement to buy its parent’s controlling stake in Israeli dairy producer Tnuva Food Industries Ltd. Bright Food Group said last month it will merge with edible oil maker Shanghai Liangyou Group, which is also controlled by the municipal government.

— With assistance by Vinicy Chan, Steven Yang, and Haixing Jin

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