China Modern Dairy Holdings Ltd. (CMD, Stock Code: 1117) recently announced that it entered into share purchase agreements on 30 October 2025 to acquire an aggregate of 107.2 million shares (approximately 1.28% of the total issued share capital) in China Shengmu Organic Milk Limited (CSM, Stock Code: 1432) from three selling shareholders for a total cash consideration of HK$37.52 million. Completion of these agreements is subject to conditions including antitrust clearance in the PRC and CMD’s shareholder approvals under the Listing Rules.

Following any completion of the share purchase, CMD’s stake in CSM, together with parties acting in concert with CMD, will exceed 30%, triggering a possible mandatory conditional cash offer for all remaining CSM shares not already owned or agreed to be acquired by CMD or Start Great (a wholly-owned subsidiary of China Mengniu Dairy). The offer price is set at HK$0.35 per share, implying a maximum consideration of approximately HK$2.02 billion if all eligible shareholders accept. The offer will only become unconditional if CMD and its concert parties become entitled to more than 50% of CSM’s voting rights by the closing date.

In parallel, Start Great has granted CMD voting rights over 2.0869 billion CSM shares (about 24.90% of CSM’s issued share capital), which could allow CSM’s consolidation into CMD’s financial statements if various conditions are met. The arrangement may terminate if the share purchase agreements fail to complete or if CMD determines insufficient ownership to consolidate CSM. CMD highlights potential business synergies, economies of scale, and greater operational efficiency upon adding CSM’s organic operations to its established dairy platform.

The transaction is classified as a major and connected transaction for CMD under the Listing Rules, requiring approval by CMD’s independent shareholders. Independent board committees and advisers have been appointed to recommend and opine on the proposed transaction and the offer. CMD advises shareholders to exercise caution in dealing in their shares until further announcements confirm whether the acquisition completes and the offer proceeds.