Bloomberg reported yesterday that deliberations regarding the acquisition of China Modern Dairy by Mengniu had begun. According to the report, Mengniu chairman Frank Ning confirmed that talks had been initiated, but added that no “good progress” had been made to date.
China Modern Dairy, which is one of China’s largest dairy farming companies, already supplies Mengniu with raw milk. Acquiring China Modern Dairy would give Mengniu more control over its milk supply – an ambition Mengniu has been up-front about.
DairyReporter.com approached Mengniu regarding the reports. A spokesperson for the dairy processor denied that any discussions had taken place.
“Kindly note that the Company and its board did not have any discussion regarding the acquisition or share accumulation of Modern Dairy,” said a statement sent to DairyReporter.com.
Share price movements
China Modern Dairy also appears to have distanced itself from the reports.
At the request of the Stock Exchange of Hong Kong, the firm has insisted that it is unaware of any reason for an increase in its share price.
Following Bloomberg's report, shares in China Modern Dairy jumped by HK$0.23 (9.9%) to finish the day at HK$2.55, after peaking at HK$2.61.
“The board of directors of China Modern Dairy Holding Ltd has noted the increases in the price and trading volume of the share of the Company today,” said today’s statement.
“Having made such enquiry with respect to the Company as is reasonable in the circumstances, the Directors confirm that the Directors are not aware of any reason for these price or volume movements or of any information which must be announced to avoid a false market in the Company’s securities or of any inside information that needs to be disclosed,” the statement added.
Enhancement of Milk Sources?
This is the second time in less than less than six months that China Modern Dairy and Mengniu have been called upon to comment on reports regarding a deal.
In August 2012, China Modern Dairy denied knowledge of any talks between COFCO Corporation and KKR – the largest shareholders of Mengniu and China Modern Dairy respectively – regarding its acquisition by Mengniu.
Mengniu declined to comment on the August reports, stating that it did “not represent COFCO Corp or KKR.” It did, however, refer DairyReporter.com to an extract of its 2011 annual report – section titled ‘Enhancement of Milk Sources’.