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Huishan tries to milk Hong Kong investors

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In the land of milk and money: Huishan Dairy may float a US$1 billion IPO next year. Photo: Imaginechina

Milk maker Liaoning Huishan Holdings, also known as Huishan Dairy, has reportedly invited proposals from investment banks to lead a Hong Kong initial public offering of up to US$1 billion.

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The deal is not set to hit the market until well into 2013. As things stand, it would probably be a challenging story.

In 2008 China's Sanlu dairy company sold melamine-tainted infant formula. Thousands of babies fell ill. Hundreds of others were diagnosed with kidney stones due to melamine poisoning, and six died. Inspectors then found melamine in milk from other dairy firms, which used it to boost their product's protein content.

Despite massive public outrage, more melamine-tainted milk was found in 2009 and 2010.

These scandals were a disaster for China's listed milk producers, which have been scrambling to recapture the trust and goodwill of the public ever since.

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A key test for Huishan during the marketing of its IPO will be to convince investors its products will always meet the highest standards.

The good news is that dairy is a dependably high-growth consumption item on the mainland.

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