COFCO, HOPU to buy Mengniu stake

By Cong Mu

State-owned COFCO and private equity fund Hopu Investment Management will jointly purchase a 20 percent stake in China Mengniu Dairy for HK$6.1 billion ($787 million), the biggest deal in China’s food industry so far, COFCO announced yesterday.

COFCO, a leading food manufacturer in China, and Hopu, founded by Fang Fenglei, chairman of Goldman Sachs’ China joint venture, will establish a special purpose vehicle (SPV) to purchase new shares from the Inner Mongolia-based dairy producer and existing shares from current shareholders.

Mengniu will sell the allotted shares at HK$17.60 ($2.27) each, representing a 7.85 percent discount on Friday’s closing price of HK$19.10 ($2.46).

The SPV, 70 percent owned by COFCO and 30 percent owned by Hopu, will hold 347.6 million shares in Mengniu once the deal is complete. It will become the largest shareholder in the company.

The proceeds from the sale will further strengthen its capital structure and financial position to support future growth and expansion, Mengniu announced yesterday.

Mengniu was halted from trading in Hong Kong yesterday and is expected to resume trading today.

Mengniu was involved in the tainted milk scandal last year. Shares in the company have climbed 89 percent this year after falling 65 percent in 2008.
 

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