French dairy major Danone has agreed to increase its holding in Chinese dairy firm Mengniu from 4% to 9.9%, with an investment of €486m.
The company, along with COFCO Dairy Investments, signed a deal to subscribe a reserved rights issue by Mengniu.
With this development, the French firm now becomes the second largest shareholder in Mengniu.
The move comes after a deal in May 2013 between COFCO, Danone and Mengniu to boost development of dairy products in China.
Subject to Mengniu's shareholders approval, the transaction is expected to be finalized in the coming months.
COFCO, Danone and Arla will combine their 16.3%, 9.9% and 5.3% respective stakes in Mengniu within COFCO Dairy Investments, a jointly-owned venture pooling all three shareholders' interests in the governance of Mengniu.
Danone operates in Fresh Dairy Products, Baby Nutrition, Waters and Medical Nutrition segments. The company runs more than 190 production plants and has a workforce of 102,000. In 2012, it generated revenues of over €20bn.
