China Mengniu shares surge on deal with Arla

[Elsha]

Shares of China Mengniu Dairy Co. HK:2319 +7.58% CIADF -0.74% climbed 7.6% in Monday morning trade in Hong Kong, helped by news that Danish-Swedish dairy cooperative Arla Foods will take a less-than-10% stake in the Chinese company under a strategic cooperation agreement. Arla, which already distributes milk powder in China under a joint venture with Mengniu, said it will expand its business relationship to include the development of a full range of dairy products bearing the Arla Foods' brands. China Mengniu's board said the tie-up would see the European dairy group provide technical and management experience, in addition to technologies which would "enhance the group's reputation as a producer for quality consumer products." The deal will see Arla take about a 6% stake in Mengniu for 1.7 billion kroner ($290.5 million).