Mengniu Dairy is set to purchase 26.9% stake in China Modern Dairy for HK$3.18bn ($409m) from private equity firms KKR and CDH Investments.The move is in line with Mengniu's strategy to focus on the quality of its milk supplies and regain trust in the country, which is roiled by a series of tainted milk scandals.
The transaction will raise Inner Mongolia-based Mengniu's stake in China Modern to about 28%.
Mengniu chief executive officer Sun Yiping said: "The increase of Mengniu's stake in Modern Dairy is to secure both quality and quantity of raw milk sources."
Founded in 2005, Modern Dairy is a raw milk supplier to Mengniu and runs 22 large-scale diary farms in China.
Mengniu sells liquid milk products including UHT milk and yogurt under its name in China. It also produces other dairy products, including milk powder.
