Groupe Danone, a world leader in the food industry, will increase its stake in Bright Dairy & Food Co to 9.7 percent through two share transfer deals, the local dairy maker said on Thursday.

The company's board has approved the stock sale to the Paris-based Groupe Danone, the Shanghai-listed Bright Dairy said in a statement to the stock exchange.

Previously, Danone's Asian unit held a 3.85 percent stake in the Shanghai company.

According to the statement, Danone Asia Pte Ltd will buy more than 40 million shares, or a 3.85 percent stake, from Shanghai State-owned Assets Operation Co at a cost of 121 million yuan (US$14.6 million).

Shanghai State-owned Assets Operation Co will quit its investment in the dairy maker.

The deal was signed as early as November 2003, but just approved by the State-owned Assets Supervision and Administration Commission of the State Council last December.

In another deal, still awaiting government approval, Danone will spend 78 million yuan (US$9.4 million) on buying a 2 percent stake from Dazhong Transportation Group Co. Dazhong's stake in Bright Dairy will shrink to 1.85 percent.

After the deals, Danone will be Bright Dairy's third largest shareholder, following Shanghai Dairy (Group) Co Ltd and S.I. Food Products Holding Ltd, which each hold a 30.78 percent stake.

"Danone's investment in Bright Dairy shows its great interests in China's potentially huge dairy market," said Chen Yu, an industry expert from China Dairy Market Consultancy.

He added that Danone, ambitious in the Chinese market, is likely to invest in other domestic dairy firms in the future.

The Shanghai-listed Bright Dairy also released its annual report on Thursday.

The company reported a 6.786 billion yuan (US$820 million) business income for 2004, a year-on-year growth of 13.46 percent.

Its net profits reached 318 million yuan (US$38 million) last year, 12.57 percent up compared with the previous year.

(China Daily March 5, 2005)