ASX-listed Freedom Foods Group bought almost one million shares of A2 Milk Co this week for about $589,000 after its stake was diluted in the past year due to the issue of partly-paid shares.

The Sydney-based food company bought 942,500 shares in four transactions in A2 this week at an average price of about 62.5 cents, according to a substantial shareholder notice filed to the NZX on Friday.

Freedom Foods holds about 117.9 million shares, or 17.9 per cent of A2, leaving it as the biggest shareholder in the milk marketing company. A2 markets milk with a protein variant said to have health benefits and plans to expand in the US, UK and Asia.

Because A2 issued partly-paid shares to executives earlier this year, Freedom Foods' stake was diluted down from 18.1 per cent when it made its last disclosure in December 2012.

Shares of A2 rose 1.6 per cent to 63 cents on Friday, and have dropped 23 per cent this year.

Last month A2 reported a slump in annual profit to $10,000, even as sales rose 17 per cent to $111 million, as a strong kiwi dollar eroded the value of revenue and earnings.

In its August 29 results announcement, Freedom Foods said it intends to keep a strategic stake in A2 in the medium-term, while keeping the option to "realise capital from the investment to support growth opportunities."

Freedom Foods said A2 offers "potentially significant value creation" through the milk marketing firm's growth in Australia and international markets.

Shares of Freedom Foods rose 3.7 per cent to A$3.12 on the ASX on Thursday, and have climbed 13 per cent this year.

NZN

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Freedom Foods laps up more of A2 Milk