(Yicai Global) March 25 -- Milkground Food Tech's shares hit a historic high after the Chinese cheese producer said that a unit of China Mengniu Dairy, one of Asia's biggest milk companies, will become its second-biggest shareholder by buying CNY315 million (USD44.5 million) worth of its freshly issued equity.

Milkground's stock price [SHA:600882] rose by 7 percent to CNY22.69 (USD3.10) this morning after which it retreated to CNY22.13 in the afternoon with a CNY7.9 billion (USD1.2 billion) market cap.

The Shanghai-based target firm will raise no more than CNY890 million (USD126.2 million) via newly issued shares, it said in a statement yesterday. Inner Mongolia Mengniu Dairy Group will subscribe to 35 percent of that and Milkground's Chairman Chai Xiu will buy the remainder via a company she controls.

The two firms have been getting closer this year. In January, Milkground announced that the Hohhot-headquartered behemoth will become its strategic investor with a 5 percent stake sale for CNY740 million. By now, China Mengniu has an 8.8 percent stake, and Chairman Chai, the controlling shareholder, a 24.4 percent one.

Milkground will use the secured funds to expand its second plant in Shanghai, and upgrade its cheese factories in Jilin province, it said. This should add 55,000 tons in annual cheese output.

By 2024, China's retail market for cheese should reach CNY11.2 billion with a compound annual growth rate of 12 percent, according to Euromonitor Consulting's report.

Founded in 1998, Milkground went public through a backdoor listing in 2016 to become the Chinese mainland's first listed firm that counts cheese production as its core business.

Editor: Emmi Laine