China Modern Dairy Holdings Ltd saw its shares surge almost 10 percent on Thursday, after China Mengniu Dairy Co Ltd announced an offer to buy it out in order to guarantee its stable supply of raw milk.

Hong Kong-listed China Mengniu on Thursday offered to buy 965.47 million shares in Modern Dairy at HK$1.94 apiece (25 cents), thus raising its stake in the latter from current 25.4 percent to 39.9 percent. The total value of the transaction was HK$1.87 billion.

Because the percentage surpassed 30 percent, the dairy giant will have to make an offer to buy out the remaining shares, according to Hong Kong's corporate rules.