CHINA Mengniu Dairy Co will pay HK$3.18 billion (US$409 million) to raise its stake in raw milk provider Modern Dairy to 28 percent to gain greater control of milk supplies amid rising worries of food safety among Chinese consumers.

Mengniu Dairy will pay HK$2.45 a share to become Anhui-based Modern Dairy's single largest shareholder, the company said in a stock exchange filing yesterday.

"Accelerating and expanding investments in quality farms will allow Mengniu to establish a safer and more stable value chain in the dairy sector, and to provide healthier and better quality dairy products to consumers," said Sun Yiping, CEO of Mengniu, according to a joint statement of the two companies.

Before the deal, Mengniu owned a 1 percent stake in Modern Dairy, which is now the company's largest raw milk supplier with 22 dairy farms across China. Modern Dairy had said it aimed to have 30 farms by 2015.

Zhou Siran, food and beverage analyst at research firm CIConsulting, said the stake boost is a smart move that allows Mengniu "to consolidate the industry chain and take a leading position in terms of high-quality raw milk resource."

Mengniu said in March that 2012 pro-fit fell 21 percent to 1.26 billion yuan.