On China Shengmu (1432)'s Conditional MGO

• On the 30th October, China Modern Dairy (1117 HK) (CMD) entered into a conditional SPA to acquire a 1.28% stake in raw milk producer China Shengmu Organic Milk (1432 HK) (CSM).

• CMD currently holds 29.99% in CSM. Should the SPA complete, CMD clears 30% and will be obligated to make an Offer for all shares not held.

• The Offer Price will be A$0.35/share, a 14.75% premium to undisturbed. The Offer will be conditional on a 50% acceptance hurdle.

China Shengmu Organic Milk (1432 HK) (CSM) is pretty illiquid. Look away now if this is not your bag.

---

The Trade:

• Trading at a 6%/14% gross/annualised spread if late April payment - assuming a six-month off-ramp.

• I don’t have a strong conviction on the back-end - but I can see CSM trading through terms.

• I think there is good chance CMD takes control of CSM.