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KKR said to pay 150m USD for stake in China’s Modern Dairy
Published on: 2009-06-16
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June 15 (Bloomberg) -- KKR & Co., the private equity company of Henry Kravis and George Roberts, invested $150 million in Chinese milk supplier Ma Anshan Modern Farming Co., two people familiar with the matter said.

KKR completed a series of investments in the company, known as Modern Dairy, the New York-based firm said today, without providing financial details. The people with knowledge of the price declined to be identified as it hasn’t been announced.

The milk supplier, based in Anhui province, has about 40,000 dairy cows and produces more than 150,000 tons of raw milk a year, KKR said. The company was not linked to a contaminated milk scandal in China last year that killed at least six babies and sickened 300,000 children.

“We have brought in not only capital, but more importantly, international best practices and expertise in the dairy farming industry that will help Modern Dairy develop world-class facilities,” David Liu, KKR’s head for Greater China, said in the statement.

Modern Dairy will use money from the KKR investment for acquisitions and to build 20 to 30 large-scale dairy farms in addition to the seven it operates now, the statement said.

KKR bought at least 20 percent of Modern Dairy, one of the people said, declining to be more specific. Peter Mckillop, a spokesman for KKR, declined to comment on the size of the deal.

Tougher Standards

The purchase of a minority holding in Modern Dairy is KKR’s second announced investment in China after it bought a stake in Henan-based Tianrui Group Cement Co. in 2007.

Modern Dairy was founded in 2005 by former managers of China Mengniu Dairy Co., the nation’s biggest liquid milk producer. Mengniu, Sanlu Group Co., Bright Dairy & Food Co. and 19 other Chinese companies were found to have sold contaminated dairy goods, leading to recalls or restrictions on products made with Chinese milk in more than two dozen countries.

China, the world’s third-largest milk producer, is pushing dairy farms to meet higher standards after Melamine, an industrial chemical used to make plastics and tan leather, was found in infant milk powder and other dairy products last year. Some suppliers had added the chemical to diluted milk to make the protein content appear higher than it is, the Chinese government said.

Modern Dairy the second investment that KKR’s Liu has worked on with the company’s chairman, Deng Jiuqiang. The two met almost 10 years ago when the former Morgan Stanley executive led an investment by the Wall Street firm in China Mengniu. China Mengniu last year posted its first full-year loss since going public in Hong Kong in 2004.

 
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