Share prices of China Modern Dairy Holdings Ltd surged to an almost 20-month high after China Mengniu Dairy Co, the country's biggest dairy producer, confirmed it has been in talks to acquire the supplier.

Modern Dairy jumped 9.9 percent, the highest close since June 2011. China Mengniu dropped 2.1 percent.

"We have been talking, but haven't made any good progress," Frank Ning, chairman of Mengniu, said after delivering a speech at a Hong Kong conference on Monday.

Buying Modern Dairy 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 supplies Mengniu with unpasteurized milk.

Mengniu Dairy in talks to buy Modern Dairy

Mengniu eyes large-scale farms for raw milk