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UPDATE 2-Yashili shares soar as Temasek, Hopu bet on China dairy boom
November 11, 2013 / 4:20 AM / 4 years ago

UPDATE 2-Yashili shares soar as Temasek, Hopu bet on China dairy boom

* Yashili leaps as much as 23 pct as shares resume trading

* Temasek, Hopu and three private investors buy stake from Mengniu

* Stake sale helps Yashili meet Hong Kong free float rules

* YuanShengTai Dairy launches up to $500 mln IPO-IFR (Adds comments, YuanShengTai Dairy IPO details)

By Elzio Barreto

HONG KONG, Nov 11 (Reuters) - 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 after its parent sold down stock to meet Hong Kong listing requirements.

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 Greater 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.

China Huishan Dairy raised $1.2 billion in an initial public offering 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.

TEMASEK INVESTMENT

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 each, putting the total deal at HK$1.65 billion ($213 million), the dairy companies said in a securities filing.

Yashili gained 17 percent to HK$4.25 in mid-afternoon trade in Hong Kong, and hit a record high of HK$4.45 as it resumed trading after a nearly three-month halt. China Mengniu climbed 3.4 percent, compared with a 1.3 percent gain for the benchmark Hang Seng index.

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.

BUYOUT OFFER

Mengniu offered $1.6 billion in June for all of Yashili, but it received offers for 89.82 percent of Yashili's stock. That fell just short of a 90 percent threshold that would have enabled Mengniu to make a "compulsory acquisition" of the remaining shares and delist Yashili from the exchange.

The takeover got commitments from Yashili's two largest shareholders, the Zhang family and private equity firm Carlyle Group, which owned a combined 75 percent stake in the infant formula maker.

After the buyout offer closed in early August, Mengniu had to sell down its stake in Yashili to ensure the still-listed company met Hong Kong's public float requirements.

Yashili shares had been suspended since Aug. 14 after the company applied for a three-month waiver to comply with the minimum public float of 23.42 percent in its case.

$1 = 7.7516 Hong Kong dollars Additional reporting by Fiona Lau and Ken Wang of IFR; Editing by Stephen Coates

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