UPDATE 1-China Mengniu to raise $395 mln in share sale

* 10 pct stake in dairy being sold to COFCO, equity fund

* Pair will hold 20 pct in firm altogether

* New capital issued at 7.85 percent discount

* Mengniu sales hit last year by tainted milk scandal

(Adds date of share trading resumption, details)

HONG KONG, July 6 (Reuters) - China Mengniu Dairy (2319.HK) said on Monday it will raise HK$3.06 billion ($394.6 million) in a sale of new shares to China National Oils, Foodstuffs and Cereals Corp (COFCO) and Hopu Investment Management.

The new shares, to be issued at a discount of 7.85 percent, represent 10 percent of the dairy's enlarged share capital, Mengniu said in a statement to the stock exchange.

The subscription marks the latest cash infusion for an industry recovering from a tainted milk scandal that directly impacted Mengniu. Its sales fell sharply after it was identified as one of the Chinese dairies found to have sold milk containing melamine.

The firm said it will use the funds to expand its existing business and make new investments.

Mengniu will issue 173.8 million new shares to COFCO and Hopu at HK$17.60 each compared with China Mengniu's Friday closing price of HK$19.10.

COFCO will own 70 percent of a special purpose vehicle that will hold the stake, and Hopu 30 percent, while the pair will buy a further 10 percent in the dairy from existing shareholders at the same price to raise their overall stake to marginally above 20 percent.

Trading of China Mengniu's stock, which was suspended pending the announcement, will resume on Tuesday.

Sources told Reuters earlier that Hopu and COFCO had been set to invest around $800 million for 20 percent of China Mengniu.

Mengniu and other major dairies like Yili (600887.SS) and Bright Dairy (600597.SS) suffered major sales declines in the tainted milk scandal's wake, leaving them needing cash to fund their sprawling operations.

Shares in Mengniu plunged 67 percent in September last year after the scandal broke. They have come back since then, up more than 89 percent this year, but are still 20 percent below their pre-scandal levels.