Temasek buys stake in Yashili

A group of investors led by Singapore's Temasek Holdings bought a $213 million stake in Yashili International Holdings Ltd, sending shares of the milk powder producer soaring on Monday after its parent sold down stock to meet Hong Kong listing requirements.

Singapore state investor Temasek, through one of its Mauritius subsidiaries, China-focused private equity firm Hopu and three individual investors, agreed to buy 471.13 million shares of Yashili from its parent China Mengniu Dairy Co Ltd for HK$3.50 ($0.45) each, putting the total deal at HK$1.65 billion, the dairy companies said in a securities filing on Monday.

Temasek bought 47 percent of the Yashili shares, with Hopu taking 38 percent. The three individual investors bought the remaining 15 percent through -British Virgin Islands holding companies, according to the filing, which did not name them.

The deal took place as China Mengniu Dairy Co Ltd was forced to reduce its stake after it failed to buy enough shares of Yashili to force a delisting of the company.

The Yashili stake sale adds to a slew of mergers, acquisitions and equity market deals in China as companies look to raise funds for expansion to cope with booming demand for everything from raw milk and infant formula to yoghurt and other dairy products.

"The government is trying to push forward industry consolidation, that's why we're seeing more acquisitions in this area," said Jacqueline Ko, an analyst at Kim Eng Securities in Hong Kong.

"There are lots of positive actions from the government. In three to five years, we're talking about two-thirds of the companies involved in the industry will be gone, so that will benefit the bigger players."

Shares of dairy companies have jumped in anticipation of consolidation in the sector and stronger domestic demand in China, where sales of dairy products are expected to nearly double from 2012 to 2017 to about $89 billion, according to estimates by business consulting firm Frost & Sullivan.

Yashili closed 17.4 percent higher to HK$4.25 in the Hong Kong Stock Exchange, and hit a record high of HK$4.45 as it resumed trading after a nearly three-month halt.

China Huishan Dairy raised $1.2 billion in an IPO in September, with its shares up nearly 15 percent since the listing.

YuanShengTai Dairy Farm, China's fourth-largest producer of raw milk, on Monday launched an up to $500 million IPO in Hong Kong, Thomson Reuters publication IFR reported.

China Mengniu agreed to buy $60 million worth of shares in the IPO as a cornerstone investor.