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China Mengniu Dairy to acquire majority stake in China Shengmu unit

China Mengniu Dairy Co. Ltd. agreed to acquire a majority stake in Inner Mongolia Shengmu High-tech Farming Co. Ltd., a subsidiary of its Chinese dairy peer, China Shengmu Organic Milk Ltd., for 303.4 million yuan.

According to a Dec. 24 filing to the Hong Kong Stock Exchange, Mengniu will acquire the shares through its wholly owned subsidiary, Inner Mongolia Mengniu Dairy (Group) Co. Ltd. The latter will pay 158.7 million yuan to Shengmu and 144.8 million yuan to Shengmu High-tech for a 51% stake in the business.

Under the deal, Shengmu will transfer all its downstream dairy business chain and related assets to Shengmu High-tech, including Huhehaote Shengmu High-tech Dairy Co. Ltd., which will be 100% owned by Shengmu High-tech.

Upon completion of the share purchase agreement, Shengmu will continue to hold 49% of Shengmu High-tech, but it will cease to be recognized as a subsidiary of Shengmu.

Completion of the deal is subject to, among other things, the completion of due diligence by all parties involved, according to the filing.

As of Dec. 24, US$1 was equivalent to 6.48 Chinese yuan.