CHINA SHENGMU (01432) opened nearly 10% higher, rising 9.84% to HK$0.335 by the time of writing, with a turnover of HK$128,000. Meanwhile, CH MODERN D (01117) opened 1.65% higher at HK$1.23.

The surge follows announcements from both companies. CH MODERN D has acquired an additional 1.28% stake in CHINA SHENGMU for HK$37.52 million. Additionally, Mengniu Dairy (02319) has granted CH MODERN D voting rights for its 24.9% stake in CHINA SHENGMU.

As a result, CH MODERN D has made a mandatory conditional cash offer for CHINA SHENGMU at HK$0.35 per share, representing a 14.75% premium over yesterday's closing price of HK$0.305.

CH MODERN D stated that the maximum consideration for the offer would be approximately HK$2.02 billion. The acquisition aims to leverage economies of scale to reduce procurement costs. Post-merger, the combined herd size of the two groups will exceed 610,000.

The expanded scale will enable CH MODERN D to utilize production advantages, secure better pricing for bulk materials like feed, further achieve economies of scale, lower unit costs, optimize production mix, and enhance competitiveness.