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China's New Hope buys Inner Mongolia dairy firm

(Agencies)
Updated: 2008-07-29 14:29

China's Sichuan New Hope Agribusiness Co said on Monday it has acquired a dairy producer in Inner Mongolia in a deal that a Chinese newspaper said was worth 100 million yuan ($14.7 million).

The purchase of a 51 percent stake in Inner Mongolia Feichangniu Dairy Co will help New Hope, based in Southwest China's Sichuan province and controlled by chairman Liu Yonghao, expand into northern China, said Li Jiahong, a spokesman for the company's parent firm, New Hope Group.

New Hope Agribusiness aims to expand nationwide in China, Asia's second-largest dairy market, and compete with bigger rivals such China Mengniu Dairy and Yili Industrial Group.

Li declined to say how much New Hope had paid for the stake, but the 21st Century Business Herald newspaper reported on Monday that the deal was worth 100 million yuan.

"China's dairy industry is undergoing a new wave of consolidation. A company has to be big or it will be eliminated," Li said.

China last month imposed new rules to restrict investment in the country's dairy industry, aiming to weed out smaller players and encourage consolidation in a sector reeling from surging raw material costs and price wars.

New Hope, which also owns feed and meat processing businesses, reported dairy sales of 1.1 billion yuan last year, up 6 percent from a year earlier, while sales volume was down 3 percent at 230,500 tonnes.

The company posted total sales last year of 4.79 billion yuan, well below market leader Mengniu's 21.3 billion yuan and Yili's 19.36 billion yuan.

"We're now still very small in the industry, but once we've established footholds nationwide, we'll expand very rapidly," Li said, adding that Hew Hope had made 12 acquisitions in the dairy industry under its expansion drive.

New Hope founder Liu, ranked by Forbes magazine as China's 12th richest man last year with $3.2 billion in net assets, has ambitious plans for expanding the group's dairy business, Li said.