A newly announced acquisition deal by high-end infant formula provider Biostime is aimed at enriching its product pipelines and an effort to respond to the country's call for industry consolidation, an analyst said Wednesday.

Hong Kong-listed Biostime International Holdings Ltd announced in a statement filed Tuesday that its two subsidiaries will acquire 100 percent stake of Changsha Yingke, a qualified domestic infant formula producer, for 350 million yuan ($57.4 million).

The deal is expected to give Biostime additional 30,000 to 50,000 tons annual production capacity of baby milk, and shorten Biostime's supply time, Biostime said.

Prior to the acquisition, established in November 2013, Changsha Yingke was owned by two subsidiaries of Hunan AVA Dairy Holdings Co Ltd, which was also the producer of Nanshan Bywise infant formula which was found to contain a cancer-inducing substance in July 2012.

Following the announcement, Biostime's share price inched slightly by 0.36 percent to HK$69.15 at market close on the Hong Kong Stock Exchange Tuesday.

The purpose of acquiring Changsha Yingke is to help Biostime to enrich its pipelines by adding low and middle-end infant formula products and cover tier-4 and tier-5 cities, Song Liang, a dairy analyst at Distribution Productivity Promotion Center of China Commerce, told the Global Times Wednesday.

Also, through this merger and acquisition, Changsha Yingke has answered policymakers' call for consolidation in the dairy sector, Song noted.

In August 2013, Biostime was charged a heavy fine of about 163 million yuan or 55 percent of its half year profits, for its price-fixing practices in violation of China's Anti-Trust Law.

To boost the image of the brands of scandal plagued domestic infant formula products and restore consumer confidence, the industry regulator had submitted a plan to the State Council for consolidation of milk powder industry in order to better control quality.

China reportedly will push for upgrading of domestic infant formula production, aiming for the top 10 producers to achieve 65 percent of the market share, and reducing the existing 127 infant formula producers by 40 by 2015, according to the plan. 

Biostime is the third largest infant formula seller in China by market share, Song said. In the high-end infant formula segment, Biostime's market share was 28 percent in 2012, according to information portal qq.com which cited a report Monday.