Chinese milk producer Liaoning Huishan plans to raise $1bn through IPO

Chinese dairy firm Liaoning Huishan Holdings is planning to list its shares on the Hong Kong stock exchange to raise between $800m and $1bn in order to support its expansion plans.

It has sought proposals from banks to handle the IPO, reports the Wall Street Journal, citing people familiar with the matter.

The company is expected to hold negotiations with bankers between 9-11 October and plans to list on the stock exchange in the second half of 2013.

Liaoning Huishan’s IPO plans come as the country’s dairy industry is struggling to re-establish its image following a series of tainted milk scandals that began in 2008, when six infants died and 300,000 children fell sick due to consumption of contaminated milk.

In order to allay consumer fears, the company plans to import heifers from Australia and grass from the US.

The dairy firm intends to raise the herd to about 400,000 and reach an annual production of raw milk of two million tonnes, in addition to manufacturing infant formula products, the report said, citing the company’s website.

Many local dairy companies have been increasing the size of their herds to retain direct control, a move to win back dwindling public confidence.

Liaoning Huishan, which was established in 1951, received investments of $290m in 2011 from a group of investors, including Hong Kong tycoon Cheng Yu-tung.

The milk producer is planning to sell shares in a market which has seen only a handful of big deals this year – between January and September, Hong Kong IPOs have raised only $5.6bn, making it the lowest since 2003, when the stock exchange raised $1.8bn during the same period.