Yashili deal fuels rally in Mengniu
Dairy firm jumps 6.9 per cent after offer of HK$12.5 billion for infant formula maker
China Mengniu Dairy soared to the highest level in more than five years after the country's largest dairy producer offered HK$12.5 billion to buy a mainland maker of infant formula.
The stock rose 8.8 per cent intraday to HK$29.20 and closed at HK$28.70, up 6.9 per cent. Yashili International, the acquisition target, gained 3 per cent, while the benchmark Hang Seng Index fell 1.1 per cent. Shares in the two companies resumed trading after being halted since June 13.
Mengniu agreed to buy 75 per cent of Yashili from chairman Zhang Lidian's family and Carlyle, it said on Tuesday. It will also offer to buy the rest of the firm for HK$3.50 a share in cash, or about 5 per cent more than Yashili's closing price on June 13.
Yashili should lift Mengniu's earnings per share next year by 7 to 17 per cent as it would help "rapid expansion into the fast-growing milk powder segment", Credit Suisse analyst Kevin Yin said in a note to clients.
The investment would help Mengniu build a bigger presence in the mainland's baby formula market, which was projected to expand more than 70 per cent to 133.5 billion yuan (HK$169 billion) by 2015, Euromonitor International said.