Mengnui has offered to buy out China Modern Dairy
A buyout between two major Chinese dairy companies could produce export opportunities for UK dairies, according to one analyst.
Mengniu, one of China’s leading dairy product manufacturers, has offered to buy out China Modern Dairy for $826 million (1117.HK) (£679m).
Arla has a joint venture with Mengniu exporting dairy to China.
Dairy analyst Chris Walkland, who visited China in 2014, said he believed the ’bigger and more committed’ Mengniu were in China, the more opportunity there would be for the co-operative.
China Modern Dairy is the country’s largest dairy farming firm in terms of herd size and the largest raw milk producer in China, with about 220,493 dairy cows across 27 farms.
The offer has followed Mengniu’s purchase of 965.47m shares in China Modern Dairy, increasing its stake in the company to 39.9 per cent.
Under Hong Kong’s corporate rules, the owner of more than 30 per cent of a company has to make an offer to buy out the shares it does not own.
Mr Walkland said: "Mengniu, Arla and other companies will all be growing consumption in China. This can only be good for exporters, especially with the UK cuddling up to the likes of China and anyone else as a result of Brexit."
Given the current volatile climate, he said farmers had to decide whether they would be better off ’riding the volatility wave’ with larger companies, such as Arla and Muller.
He suggested companies which had invested in markets globally could be more secure but smaller companies may be more volatile could ’nip into the safety of port and out again faster’.
"We have seen this with the rate of change of milk price increases recently, with smaller companies able to react faster than the big ones," Mr Walkland said.