KKR Completes Chinese Daily Farm Deal

HONG KONG (Reuters) – Kohlberg Kravis Roberts & Co. said it completed a series of investments in Ma Anshan Modern Farming Co Ltd, a leading dairy farm company headquartered in China’s central province of Anhui.

Modern Dairy is one of the largest operators of centralised large-scale dairy farms in China, according to the announcement.

With KKR’s investment, Modern Dairy aims to build another 20-30 large-scale farms in China and pursue acquisitions over the next few years in order to capitalise on the industry’s growth, the private equity firm said.

Reuters reported last December that KKR planned to invest $100 million in the Chinese dairy, taking a stake in a fragmented and troubled industry.

Other investors may pour $150 million more into the company alongside KKR, said the source at the time. Monday’s announcement did not include financial terms.

The investment is among the few China deals for New York-based KKR, one of the world’s biggest and oldest private equity firms that arrived in Asia only a few years ago.

KKR is investing in an industry that, while tainted by last year’s milk scandal, reaches into the world’s largest consumer market.

KKR is known for participating in some of the biggest leveraged buyouts across the United States, Europe and Asia. So, while this relatively small deal in a Chinese dairy farm is unique to KKR, other Western firms have put money into the industry.

Morgan Stanley (MS.N) and Goldman Sachs (GS.N) were among the investors that agreed to pay $73 million in January 2007 in Taizinai Group, a Chinese milk-based drinks manufacturer.

Beijing said last October that China’s dairy industry suffers from chaotic production and lax oversight, announcing toughened rules after infant milk powder adulterated with the industrial chemical melamine was found to have killed four children and left many thousands more ill with kidney problems and complications. (Reporting by Michael Flaherty; Editing by Saeed Azhar)