30 October 2025 – China Modern Dairy Holdings Ltd. (“CMD”, HKEX Stock Code: 1117) announced that it has entered into a series of share purchase agreements aimed at achieving strategic control over China Shengmu Organic Milk Limited (“CSM”, HKEX Stock Code: 1432). This move will integrate the complementary strengths of two leading enterprises in the dairy industry, forging a globally leading dairy group distinguished by its scale, efficiency, innovation in raw milk, and commitment to sustainable development.

Making an Offer that Highlights Value

According to the agreements, CMD has conditionally agreed to acquire approximately 1.28% of CSM's shares and has been granted an irrevocable voting proxy over approximately 24.90% of CSM's shares held by Start Great, a subsidiary of its controlling shareholder, Mengniu Group. Upon completion of these transactions, the aggregate voting rights held by CMD and parties acting in concert with it will exceed 30%, thereby triggering a mandatory conditional cash offer under Hong Kong's Code on Takeovers and Mergers and Share Buy-backs (the "Takeovers Code") to acquire all remaining issued shares of CSM at a price of HK$0.35 per share (the "Offer").

This Offer Price represents a premium of approximately 14.75% over CSM's closing price of HK$0.305 per share on the last trading day (30 October 2025), providing an attractive opportunity for CSM's shareholders to realize the value of their investment.

A Union of Strengths to Unlock Significant Synergies

This strategic integration represents a union of two industry leaders, signifying more than a simple aggregation of business scale. By complementing and deeply integrating their respective strengths in resources, technology, market access, and management, the integration is expected to unlock significant synergies, providing strong support for the new group's long-term, high-quality development.

Qualitative cost advantages from economies of scale. Upon completion, the combined herd size will exceed 610,000 heads, with a combined annual raw milk output of over 4 million tons, creating one of the world's largest dairy farming groups. This immense scale will significantly enhance bargaining power in the procurement of feed and other bulk materials, effectively reducing unit costs and solidifying a cost leadership position.

Strategic upgrade of the product portfolio. The integration will substantially increase the proportion of specialty milk (including organic milk) in CMD's output from the current 8% to over 20% for the combined group. This not only diversifies CMD's raw milk supply structure but also significantly enhances its market competitiveness and profitability in the high-value-added raw milk segment.

Differentiated advantages built on sustainability. CSM's unique "desert-organic-circular" model, which perfectly combines desert management with organic dairy farming, is a global exemplar of green and sustainable development. CMD will leverage this integration to adopt this proven ecological development model, establishing a unique differentiated competitive advantage, enhancing the company's ESG profile, and attracting a broader base of long-term investors.

Forging a New Path to Lead the Industry's High-Quality Development

This integration comes at a pivotal moment for China's dairy industry. For CMD, this is a landmark strategic move. We have a deep foundation in large-scale farming and operational excellence, while CSM is unique in the organic milk sector and its sustainable ecological model. By combining our core strengths, we are achieving not just an expansion in scale, but a leap in the quality of our development. Together, we will be dedicated to improving production efficiency, reducing costs, and providing our downstream customers with a more diversified, higher-quality supply of raw milk. We firmly believe this integration will create profound long-term value for our shareholders, customers, and the entire industry.

CMD plans to fund the acquisition and the Offer through its internal resources. Following the completion of the transaction, CMD intends to leverage its advanced operational and management experience to further assist CSM in enhancing its farm management standards and production efficiency. The two parties will collaborate deeply in areas such as technological R&D, digital management, and supply chain synergy to jointly drive innovation and development across the industry.