China's YuanShengTai Dairy IPO in HK

Hong Kong - YuanShengTai Dairy Farm , China's fourth biggest raw milk producer, is set to raise about $425 million after pricing its Hong Kong Hong Kong IPO below the mid-point of a marketing range.

The company, also known as YST Dairy, was the second Chinese dairy producer to tap Hong Kong's stock market for funds in the past two months, benefiting from China's booming demand for milk and other dairy products. In September, China Huishan Dairy Holdings Ltd raised $1.5 billion from its Hong Kong listing.

YST Dairy priced the IPO at HK$2.70 per share, compared with the indicative range of HK$2.49-HK$3.18, IFR, a Thomson Reuters publication, reported.

The company offered 1.22 billion shares in the IPO, putting the deal value at HK$3.29 billion ($425 million).

The IPO got a last minute boost after the Chinese government unveiled major economic reforms following the Third Plenum that ended last week, which included allowing millions of families to have two children.

Analysts hailed the easing of one-child policy coupled with a raft of other measures as the most significant since Deng Xiaoping led a series of reforms in the late 1970s and the early 1980s.

That helped stoke a rally in companies that make baby products and infant milk formula makers among others on Monday.

Overall, 2013 is shaping up as a busy year for capital market and M&A activity in China's dairy sector. In June, China Mengniu Dairy Co, the nation's largest dairy producer, acquired majority control of local infant-formula maker Yashili International Holdings Ltd for $1.6 billion.

The YST Dairy deal received strong demand towards the top end of the range on the back of positive sentiment for China's dairy sector in recent months, people familiar with the matter told Reuters previously. Huishan Dairy shares have risen about a fifth since debuting in late September after a disappointing start.

The shares fell about 10 percent on its debut and that probably encouraged underwriters to price YST Dairy more reasonably so as to leave some room for a first-day pop, the people added.

YST Dairy plans to use 75 percent of the IPO proceeds to build five new farms and another 15 percent to develop upstream operations, the company's IPO prospectus showed.

The company's revenue rose 18 percent to 385.1 million yuan ($63.20 million) in the first half of 2013 from a year earlier, while profit dropped 6.1 percent to 99.6 million yuan.

Credit Suisse and Macquarie Group acted as joint global coordinators of the IPO.

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