(Yicai Global) May 13 -- French multinational Danone has sold its entire stake in China Mengniu Dairy, the Asian country's second-largest dairy products seller, for HKD15.4 billion (USD2 billion) after eight years of partnership amid weakening ties.

Most of the proceeds of the 9.8 percent stake sale will be returned to stockholders through share buybacks, the Paper reported today, citing the Paris-headquartered firm that used to be Mengniu's second-largest shareholder.

The transfer was expected. Danone said in a bourse filing on March 1 that it is reviewing its investment portfolio. A few days before that, it had agreed with COFCO Dairy Investments, a joint venture that the French firm had formed with Denmark's Arla Foods and Beijing-based COFCO, to convert its indirectly held equity in Mengniu into direct shareholding ahead of a potential one or more transactions.

The pair began working together in 2013 when Danone bought a 4 percent stake in the Hohhot-based dairy giant.

The French company could use the Chinese firm's sales network and government resources while Mengniu could benefit from the partner's experience and technology, independent dairy sector analyst Song Liang told Yicai Global earlier. But as Danone expanded its investment in nutritional products and infant milk powder, the pair started to even compete in some areas.

In early March, Mengniu said that its business development and strategies will not be affected by Danone's decision. COFCO will remain the company's largest shareholder, offering its firm support to Mengniu's management and team, it said.

Mengniu retained its position as China's second-biggest seller of dairy products last year despite its waning gains. Net profit fell by 15 percent to CNY3.5 billion (USD542.5 million) from 2019. Its revenue slid nearly 4 percent to CNY76 billion (USD11.8 billion).

Shares of Mengniu [HKG: 2319] climbed 2.7 percent to HKD43.10 (USD5.60) in the afternoon.

Editor: Emmi Laine, Xiao Yi