China Mengniu Dairy : China Mengniu : Arla Foods Becomes Strategic Investor
06/16/2012| 05:23am US/Eastern
By Yvonne Lee
HONG KONG--China Mengniu Dairy Co. (2319.HK), China's largest milk producer by sales volume, said Friday in a statement that Denmark's Arla Foods has become its strategic investor by buying a stake in the company from private-equity firm Hopu Investment Management Co.
Under the agreement, Arla Foods indirectly owns about a 6% stake in Mengniu, but the Chinese milk producer didn't give financial details of the deal.
The European dairy company Arla Foods also confirmed Friday in a separate statement it agreed to invest 1.7 billion yuan ($270 million) in the Chinese dairy company. The investment is expected to increase Arla's turnover in China five-fold by 2016 from 700 million Danish kroner in China last year, it said.
"It will contribute positively to our cooperative owners' milk price from day one, as we are able to add more value to milk that we, otherwise, would have to sell on the global bulk trading market where the profit is lower historically," Arla Foods Chief Executive Peder Tuborgh said in the statement.
Since 2005, Arla has primarily sold powdered milk products to the Chinese market through a joint venture with Mengniu. Under the agreement, Arla will further develop its dairy business and extend the category from milk powder to a full range of dairy products to China, the fastest-growing dairy market in the world.
Consumption of dairy products in China is growing faster than the nation's rapidly increasing dairy production. With a growth rate of around 10%, the Chinese market is expected to surpass the United States as the world's biggest market for dairy products in 2020.
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