Chinese Dairy Company to Bid on Danone's Stonyfield -- Update

China's largest dairy company is preparing an $850 million bid for U.S.-based Stonyfield Farm Inc., which makes organic and Greek-style yogurt, a product that is increasingly popular with upscale consumers in China.

Inner Mongolia Yili Industrial Group Co. said that it would bid for all shares of Stonyfield, which is based in Londonderry, N.H. and is a subsidiary of French dairy company Danone SA. The statement was made Thursday in a filing to the Shanghai Stock Exchange.

Yili, China's largest dairy company by sales, cautioned in the statement that the bid may not be successful, but didn't elaborate. Last month, Yili scrapped a bid to buy a 37% stake for $679 million in Hong Kong-listed China Shengmu Organic Milk Ltd. after it failed to get Chinese regulatory approval, China Shengmu said in a regulatory filing.

Yili booked a net profit of 5.66 billion yuan ($820 million) on sales of 60.61 billion yuan in 2016.

Stonyfield is known for its organic and Greek-style yogurt, dairy products that are gaining appeal in China as consumers become more health conscious, according to data provider Euromonitor International.

Chinese companies have been acquiring Western companies in part to gain expertise. China's WH Group bought U.S.-based Smithfield Foods Inc. for $4.7 billion in 2013, and its meat factory in Zhengzhou uses U.S. pork and techniques to manufacture sausage.

The perceived safety of Western brands is also a selling point with Chinese consumers who have endured a series of tainted food scandals. Yili was among 22 Chinese dairies forced to recall its products in 2008, when melamine added to milk it and others sold was blamed in the deaths of six infants and the poisoning of 300,000 others.

Yili already leads in yogurt sales, according to Euromonitor, adding that it already has rolled out organic and low-sugar varieties.

Danone said earlier this year that it made a "strategic decision" to sell Stonyfield as part of an agreement with the U.S. Department of Justice to win approval for its $10 billion acquisition of U.S. organic-foods producer WhiteWave Foods Co.

Write to Wayne Ma at wayne.ma@wsj.com

(END) Dow Jones Newswires

May 11, 2017 10:06 ET (14:06 GMT)