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.
Write to Yvonne Lee at yvonne.lee@dowjones.com