China Mengniu Dairy, the country’s second largest dairy company, said it would issue exchangeable bonds worth US$194.8 million that could be exchanged for shares of China Modern Dairy…Full Article: South China Morning Post May 2017

Key Point

  • According to the Hong Kong Stock Exchange, if all the bonds are exchanged for the Modern Dairy shares (Hong Kong listed), it would represent 11.24% of Modern Dairy’s issued capital.

ChinaAg Comments

  • In January 2017, Mengniu Dairy proposed increasing its stake in Modern Dairy from 25.4% to 39.9%. Modern Dairy manages 114,600 dairy cows.
  • From January to June 2016, China Mengniu Dairy’s recorded a net profit decline. The decline was partially due to losses from China Modern Dairy and a decline in raw milk prices. China Mengniu Dairy had a 25.41% stake in China Modern Dairy at the time.
  • In November 2015, the Mengniu-Yashili plant in Pokeno (near Auckland), New Zealand, opened after a three year construction process.  The factory has an annual production capacity of 52,000 MTs and was slated to begin exports to China in early 2016.
  • In June 2013, China Mengniu Dairy agreed to purchase a majority stake in Yashili International for over HK$11 billion ($1.42 billion). Mengniu bought its 75% stake in Yashili from chairman Zhang Lidian’s family and from the Washington DC-based Carlyle Group (private equity firm).
  • In May 2013, Kohlberg Kravis Roberts (KKR) divested of its 27% stake in Modern Dairy to China’s Mengniu Dairy.
  • In 2008, China Mengniu Dairy signed a 10-year raw milk supply off-take agreement with China Modern Dairy. According to a representative of UOB-Kay Hian Hong Kong (investment banking), China Mengniu Dairy’s proportion of raw milk supply from China Modern has decreased from approximately 90% to 70% recently (~2016).
  • Founded in 2005 and headquartered in Ma’anshan, Anhui Province. China Modern Dairy (HKG:1117) is China’s leading raw milk producer. The Beijing-based private equity firm, CDH Investments, has invested in both China Modern Dairy and China Mengniu Dairy.
  • Founded in 1999 and headquartered in Hohhot, Inner Mongolia Region, China Mengniu Dairy (HKG:2319) is one of the leading dairy product manufacturers in China, with “MENGNIU” as its core brand. In addition to milk, the company also produces and distributes ice cream, infant formula, yogurt, and cheese.

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