Chinese dairy giant Mengniu Dairy Co Ltd denied last night it is in talks with China Modern Dairy Holdings Ltd, Mengniu's largest raw milk supplier.

"The Board noticed that there have recently been some rumors about the proposed acquisition of a Hong Kong listed dairy farming company. The board would like to clarify that (Mengniu) never undertook any negotiations with the targeted company," Mengniu said in an announcement filed to the Hong Kong Stock Exchange late Wednesday.

Last August, Bloomberg reported that Mengniu held talks to acquire China Modern Dairy.

Buying Modern Dairy, China's largest raw milk producer, would give Mengniu more control over its milk supply as concerns about safety in the nation's dairy industry linger. The Ma’anshan-based Modern Dairy generated almost all of its 735.6 million yuan ($121.18 million) of revenue for the six months through December from supplying Mengniu with unpasteurized milk, according to Bloomberg.