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China Mengniu Dairy, the country's biggest producer of liquid milk, is buying the remaining 48 per cent stake it does not own in a Wuhan venture for 134.4 million yuan to expand in central China.

Mengniu  wanted to buy the stake in Mengniu (Wuhan) from its indirect subsidiary, Wuhan Frealth Dairy,  Hong Kong-listed Mengniu said.

The net loss attributable to the 48 per cent  Mengniu (Wuhan)  holding was 4.3 million yuan last year, while the stake's net asset value was 68.6 million yuan at the end of December.

The Wuhan company makes and sells liquid milk  in  central  mainland.

The acquisition would enable Inner Mongolia-based Mengniu 'to enhance its strategic development and competitiveness in central China' and expand market share in that region, the company said.

Mengniu is expanding in a market  where competition is heating up.

Shanghai-listed Inner Mongolia Yili Industrial Group, its larger  competitor, was planning to raise about US$200 million from a secondary listing in Hong Kong this year to fund its expansion,  mainly in western and central China, including Xinjiang and Sichuan provinces, sources said.

Mengniu also competes with Bright Dairy and Food, which recently strengthened its assets  in a restructuring, in an US$8 billion  mainland industry dogged by price wars.

Mengniu's share of the  country's milk market by volume, excluding milk beverage and  yogurt, rose 3.1 percentage points to 31.7 per cent over the six months to June last year, according to an ACNielsen survey.

The company's first-half net profit jumped 39 per cent to 343.43 million yuan as rising sales more than compensated for higher raw material costs. Sales grew 58.7 per cent to 7.55 billion yuan in the six months to June.

Shares of Mengniu rose 2.51 per cent to HK$22.45 in Hong Kong on Wednesday, taking their gain this year to 10 per cent.



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