European dairy firm Arla Foods Amba has tied up with China's baby food maker Biostime International to invest in adding production capacity for infant formula products, its second venture in China this month.
The two parties have signed a 10-year agreement to co-invest a total 163 million Danish crowns ($27.64 million) to expand production capacity at Arinco, Arla's largest infant formula production facility in Denmark, Biostime said in a statement.
The deal is aimed at securing a yearly production volume of 20,000 tons of infant formula powders dedicated to Biostime by 2015, the Hong Kong-listed firm said.
Last week, Arla said it would buy 6 percent stake in China Mengniu Dairy Co Ltd from private equity fund Hopu for 1.7 billion Danish crowns as global dairy companies seek to position themselves as safe alternatives in China's growing dairy sector.
China's milk industry has been attracting overseas companies as recent scandals of contaminated products, including baby formula containing a chemical used in plastic and fertiliser, has made consumers willing to pay a premium for a foreign brand.
Shares of Biostime eased 0.41 percent and Mengniu was down 1.2 percent. That was compared to a 1.08 percent decline in the benchmark Hang Seng Index ($1 = 5.8969 Danish crowns)
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