HONG KONG, May 20 (Reuters) - A Danone Group joint venture has agreed to take a stake worth about HK$3.6 billion ($464 million) in China Mengniu Dairy Co Ltd, marking a comeback for the French company in China where food scares have hit consumer confidence.
China Mengniu, one of the country's largest dairy producers, also said on Monday it would set up an 80 percent-owned joint venture with Danone to develop a chilled yoghurt product portfolio in China, Hong Kong and Macau.
In a filing to the Hong Kong bourse, China Mengniu said Farwill, a unit of its parent COFCO Corp, would transfer 148.01 million shares, or 8.3 percent of Mengniu, to a joint venture 51-percent owned by COFCO and 49 percent by Danone.
It did not say how much the deal was worth, although based on the last closing stock price of Mengniu it could be valued at about HK$3.6 billion.
Chinese state-owned food enterprise COFCO would remain Mengniu's single largest shareholder with 27.83 percent after the transaction was completed.
The Chinese dairy company gave no further details.
Danone said in a press release it would become a strategic investor in Mengniu, holding about 4 percent with an aim to increase that stake in future.
Shares of Mengniu were up more than 8 percent on Monday morning at HK$26.6, beating the 1.5 percent gain on the Hang Seng Index.
The news comes amid heightened concern over food safety in China after a series of scandals that has left local brands' reputations in tatters and fuelled demand for foreign-made goods.
In 2007, a yogurt-making partnership deal between Danone and Mengniu was terminated after it failed to gain government approval.
Earlier this month, China Mengniu said it planned to buy 26.92 percent of China Modern Dairy Holdings Ltd for HK$3.18 billion to secure a stable, long-term premium milk supply. ($1 = 7.7629 Hong Kong dollars)
(Reporting by Donny Kwok; Editing by Anne Marie Roantree and Stephen Coates) Keywords: CHINAMENGNIU DANONE
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