China Mengniu Dairy, one of the mainland companies caught up in last year’s toxic milk scandal, is to receive a $790m investment to help transform its operations.

The Hong Kong-listed company announced on Monday that it would raise HK$6.1bn ($790m) from the equal sale of existing and new shares to a consortium comprising China National Oils, Foodstuffs and Cereals Corp (Cofco) and Hopu Investment Management.

State-owned Cofco, the country’s largest food importer and exporter, and the investment fund would together own about 20 per cent of China Mengniu’s enlarged issued share capital, the company said. Together they will be the company’s largest single shareholder.

China Mengniu said in a statement that it intended to use the investment to expand its operations.

Cofco and Hopu will set up a special purpose vehicle and subscribe for the shares at HK$17.60 a piece – an 8 per cent discount to China Mengniu’s closing price on Friday.

Cofco will own a 70 per cent stake in the special purpose vehicle, while Hopu will own the remaining 30 per cent.

China Mengniu hopes to utilise Cofco’s nationwide distribution network and to use the investment to take on foreign groups such as Danone in higher margin produce such as yoghurt.

Hopu is a mainland Chinese fund backed by Temasek, Singapore’s state investment agency, and Goldman Sachs.

In recent months, the $2.5bn fund has gained global prominence by engaging in high-profile multibillion dolllar acquisitions of stock in Chinese banks sold by Royal Bank of Scotland and Bank of America.

As a result of the investment, the consortium will have the right to appoint four directors to the 11-strong board and help to push through significant changes to the company’s corporate governance and operations.

The investment in Mengniu is the latest into the sector as the industry seeks to modernise after it had emerged last year that 22 dairy companies had sold products that contained melamine, an industrial chemical that boosts protein levels but in high doses can cause kidney stones. More than 50,000 children fell ill and four infants died.

The scandal led to worldwide recalls of foods that contained Chinese dairy ingredients.

It highlighted gross inefficiencies in quality control of China’s fragmented and rapidly growing dairy industry.

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